Working Freelance in the Creative Media Sector

Contractual obligations and financial issues

Unit 14: Learning outcome 2

Name:____Abby Downing___

Project TitleContractual obligations and financial issues

Unit(s)Working Freelance in the Creative Media SectorUnit No14Tutor(s)Dave Bakes

Assessment

In order to be assessed for this assignment you must complete the following work and submit it by the required time. Below are the stages with the corresponding assessment criteria as outlined in the unit specifications.Task (s)Grading Criteria

PassMeritDistinction

2P2 describe contractual obligations and financial issuesrelevant to freelance work in the creative media sectorM2 explain contractual obligations and financial issues relevant to freelance work in the creativemedia sector with reference to detailed illustrative examplesD2 critically consider contractual obligations and financial issuesrelevant to freelance work in the creative media sector with supporting argumentsand fully elucidated examples

Use this workbook to help. Having a specific freelance job in mind will help you when it comes to constructing your answers. Using freelance websites will also help. Ideally, you should make contact with someone working in the freelance industry to help you gain a deeper understanding.

Contracts:

Describe on-going regular contracts:

On going regular contracts are contracts where you receive on going work from the same client. This can be good because it means that you are guaranteed work, but it can also get to much and all of your time could be given to this one particular client.

With this type of work youll need to be responsive, reliable, and most often, work within regular business hours (if you arent already). The clients youll be producing work for are paying thousands, or maybe even hundreds of thousands of dollars to the design firm, and a large amount of that is to compensate you!

Deadlines will be aggressive, and your communication skills will need to be sharp. Dont be surprised if you find yourself having phone or Skype calls multiple times a day, every day during business hours with your firms team and/or the client.

Describe on-going sporadic contracts

On going Sporadic contracts are contracts that arent consistent nor permanent. They are contracts that consist of working with s small business or firm occasionally but you arent guaranteed work from them, it could be for a short period of time on projects. Working with small businesses is an easier way of getting work when working freelance. Because you can create a personal relationship with the company or business but the work is not always consistent. There is potential to make this work consistent but varies on the different work you are doing.

Describe one-off projects

These are projects that come and go and dont guarantee any consistent work or pay. This means when you complete the work then you are done with that client and project. This work is usually very quick and can be done within a day, if providing a good service with this client it could potentially turn into an on going contract with this client if you impress them, because you can offer more for them. For example if you are creating a leaflet for this client you could offer print services, try going the next step to get their attention.

Explain the different stages of the commissioning process

Writer submits a pitch to the editor: this is when the writer comes up with an idea that they send of to the editor to have a read of. The good points of this are you can keep on sending your ideas of if the first one is not good enough. The disadvantages of this are that you could spend a lot of time on the pitch when it is unsuccessful. The editor then reads the pitch and makes a decision: this is when the editor has a choice; they could be dealing with a lot of pitches so it is a slight chance that yours could be used. The disadvantages of this are it limits you to wow them in person because your pitch is in writing. The advantages of this are that you could get chosen. If the article isnt suitable the writer is sometimes told: the advantages of this are that you can try again if you are told quickly or you could carry on to find other work. The disadvantages of this are you could be waiting a long time to hear back from then and not hear from the editor at all. If the article is suitable, the Editor contacts the writer and discussions begin from their: the advantages of this are you are not left with no answer to whether you have got the pitch or not. Also that you can start to think more into your idea and start writing. The disadvantages of this are that you could be told to change a few things that you do not want to, but with discussions you can both be happy with the conclusion. When content is agreed, a standard contract is sent to the writer: this is when they make a simple contract and send it of for the writer to read and if agreed signing their name. It is important the contract is properly read so that they do not break the law and get sent to court. The advantages of this are that you are guaranteed work and pay when signing the contract. The disadvantages of this are that you are not told sometimes when you will get your money. The writer writes the article and emails the first draft to the editor: the advantages of this are that your feedback for improvement is handy for making the article at the best you can make it. The disadvantages are that you will need to make it good first time to impress the editor to use it sooner rather then later. The writer makes changes; Editor checks and then signs the article off. Article then goes to the designer: disadvantages of this are that you could be doing more then one draft if the editor is still not pleased, this is usually not the case as the improvements are made after first draft. The advantages of this are that the designer usually gets the article into the print from there but not always the case. Article published and the writer is paid (usually and only upon publication): this means that the writer could not be paid for as long as it takes for the article to be published which could be months. The only advantage is that you are lucky to get it published quickly.

Negotiating a contract:

What different elements should you discuss when negotiating a contract?

Deadline its important to get this as precise as possible so that you arent charging your client extra money for time you have spent on the project when you didnt need it. To show good reliability. Price/hourly rate - how much will you get paid? When will you get the money? How in what format? Time scale preview - final work Ethics you will need to discuss what ethics you have so you are both comfortable with the work on the project you are doing. Contractual obligations Specifics instruction/outline Advance you will need to check if you will get an advance of money before the project, this is usually on long projects to keep your money going. Audience/style Style of your work will depend on its audience, it is important to find out what target audience your client has in mind. Publications - where is it going to be published? Country? Magazine? Resources you will need to find out what resources you will need and if they can be provided by the client or of need of hire. Company what company you are working for or could be The scope of the project Requirements/expenses to see whether the client is paying for requirements such accommodation, travel and equipment hire.

It is extremely important to follow a contract; otherwise you will be in breach of contract if you fail to do so. The different types of breaches are minor breach, Material breach, Fundamental breach and Anticipatory breach.

Manchester Building Society is suing business advisers Grant Thornton for 49million.The building society yesterday said it was pursuing its former auditor for breach of contract, negligence and breach of statutory duty relating to audit services and advice.Grant Thornton resigned from the work in 2013.Read more: http://www.thisismoney.co.uk/money/news/article-2997649/Manchester-Building-Society-suing-advisers-breach-contract-49m-claim.html#ixzz3UpY1Dy4C Follow us: @MailOnline on Twitter | DailyMail on Facebook

What areas should your proposal or treatment cover?

What the proposal is for How will you carry out the work Why should they use you When you will do it Where will you carry out the work How much you will charge/expect to be paid

What different elements could you need to think about in your costings and budget? Why should you undertake costings and budgeting?

When sorting out the cost and budget to come up with final prices it is important to think about the things that you might have to pay for, for example equipment hire, travel/accommodation costs etc. Creating a detailed budget of all the costs and your own pay will give a clear view of the price to give your client. Cost is very important to work out because if you charge too little for the work you will not generate enough to keep your business going. But charging to much will not get you a good representation, when pricing fair and right you may be used for similar projects again in the future. For example if you are working as a freelance photographer and photography models that are outside of your home time you might need to pay for a train, the accommodation if the job is long and fair away, equipment hire if you dont have some equipment involved in the shooting.

How good do you feel you are at scheduling work? What strategies could you use to help you with this?

Scheduling work is very important if your work needs to be done at a certain time and in a certain order, it is important to plan the jobs you need to do out into different days in order for the whole project to be completed on time. I believe that I am not very good in scheduling work myself but I could improve my making a good schedule plan which includes not only dates but specific times in the day I need to have jobs completed by, this will help me brake the project down and it will become clearer and easier to see what I have left to do to get everything finished. By also adding contingency time it will make it a lot easier to work with in case something goes wrong or you have to re do a piece of work. If nothing goes wrong this time can give longer to make sure everything is done correctly and to the professional standard in order to impress the client as well as meeting the deadline.

Why must you manage risk and how could you manage it?

Managing your risks is very important for yourself and meeting deadlines. You need to think of every possible thing that can go wrong, even if it is very unlikely or not very relevant it needs to have a back up plan to see if this happens. This is where you make your contingency plan and plan out how much time you would need for this. You could manage this by making a table to state everything that could go wrong and having the plan next to it for if it does go wrong. This could involve extra costing and equipment you might need for if they were to go wrong. It could be anything from a fall/accident to a piece of work not going write and having to start over and the need of new materials.

Should freelancers sub-contract work?

Sub-contracting work is sometimes important to carry out if you are working on a larger project and do not have the skills to do it all by yourself, another reason it is used for is that if you are in need of professional help, the jobs you are going to carry out might have the need of expertise help like photography or graphic design that you do not have. The advantages of this are that you can get the work done to a professional standard how the client wanted it to be like. The disadvantages are that the cost could be an issue, professionals usually have a high pay limit. More advantages include: being able to hire them anytime for more flexibility, they can usually start at short notice, the length and specification of the job is up to you and you can get temporary cover for a worker that is of work. More disadvantages include cost your business more than the equivalent daily rate for employing someone, your business in itself doesnt develop skills within it by relying on sub-contractors.

Financial:

How could you be paid as a freelancer? Are there any issues you should be aware of?

Pay Pal this is a fast and easy method to transfer money online. This method however has a nominal fee and has very strict policies you need to be aware of. Escrow - this is known to be the most secure method to use when working freelance, the money goes into an account and is accessible when the job is complete. It is a good method to use when working with a client you do not know well. Electronic funds transfer (EFT) this method is very simple and just requires giving some bank details of to another party so they can transfer money into your proffered account. This way is simple but not secure, it shouldnt be used if your client is unknown. These are all money transferring options that can be processed online. There are other ways of paying freelancers that do not involve the internet including: Checks this is probably the slowest method of payment however it doesnt require any bank details and is secure. Cash in hand - easy method but nothing is proved to show they have payed you. Quick

Why is invoicing important? What should you include on your invoice?

Invoicing is important because contains all your hours and ensures that you get paid for everything youre doing. It is a good way of keeping a track record of everything youve done and everything you have being paid. It tracks your earnings, spendings and business. Another reason of why they are important is breaking down the costing, this helps when the client wants to know exactly what theyre paying for and how much each thing is going to cost, the invoice states this, this is good for avoiding arguments at the end of a project. Creating a good laid out invoice also shows good professional work, this is very ideal for a freelancer because it builds up their reputation and looks good to their client, this is good for future work because you would be recommended. There are many things that you need to include in your invoice which are: Brand Name/Logo: this is good because it will create brand recognition. Details: state the following details to make it easier for your client to contact you and for future use: your name, email address, URL, phone number and mailing address. Clients Details: include their name and business and also some of their personal details including phone number and email address. An invoice number: when working with software that specialises in invoicing it will automatically be numbered for you, when doing it yourself from scratch you will have to manually add the numbers. This is good for future use if your client wants to question something on the invoice or when dealing with tax. Detailed charges: if you have more then one product or service that needs charging for, separate them and detail them for client to understand. Payment details: to make it easy for everyone state how you would like to be paid and the details of the payment for example Pay Pal or Bank Transfer. Terms and Conditions: these are usually talked about before the project is set out but it is important to include them at the end within the invoice also. Due date: Important detail for getting paid, include this with the payment details.

Why would you use and accountant?

There are many positive reasons for having an accountant, it is very important to keep your accounts monitored to know how much you are earning, spending and the profit you are making. This can be hard to keep track of when you have a lot of work to do so hiring an accountant can sometimes be beneficial for your business, even though you have to pay them it usually works out better for your business because they will know your exact profit and if you are being taxed correctly. Having an accountant can help you save time, save you money and help devote stress. Because you are always working it means not having to worry about tax deadlines (which could cost you more money) and worrying about how much profit you are making. There are also a few disadvantages of having an accountant, which include filling out large amounts of paperwork per month, which takes around 20 minutes. Accountants themselves need to be filed every year, which happens at the companys house. You will also have to file accounts, company tax and corporation tax calculations with HM Revenue and Customs every year. Accountants will be costly if you are only contracting for a short time.

Explain overheads and expenses and the different between them.Overheads are the costs for a business that are there to keep it going. These costs need to be paid; they can include studio rent, advertising, insurance etc.

Expenses are costs that are there when completing a job, for example equipment hire, travel costs, paying assistants, buying materials etc.

Expenses happen when carrying out a job, overheads happen when carrying out a job or not, these are costs that need to be paid of, usually a direct debit.

How much can you earn before paying income tax?

The standard Personal Allowance is 10,600, which is the amount of income you dont have to pay tax on. Income Tax ratesTax rate Taxable income above your Personal AllowanceBasic rate 20% 0 to 31,785People with the standard Personal Allowance start paying this rate on income over 10,600Higher rate 40% 31,786 to 150,000People with the standard Personal Allowance start paying this rate on income over 42,385Additional rate 45% Over 150,000

What are the penalties for avoiding income tax?

If you send your tax of late you can get a fine of 100 if it is up to 3 months late, any further will sum up to a larger fine. You can only appeal against a penalty if you have a reasonable excuse.

The penaltity depends on how much tax you have not paid and how long it has been not paid for, if it sums up to a lot of money and a long time unpaid then it could conclude in a prison sentence or property forfeiture.

The Rolling Stones have had their share of escapes from taxation. Their 1972 album Exile on Main St. was recorded in France, where they had relocated in order to avoid paying huge tax bills in England. Thirty-five years later, The New York Times reported that Mick Jagger, Keith Richards and Charlie Watts had been using a Dutch accounting firm, Promo group, to ease their tax burden for decades.

Why the Netherlands, you ask? Because the Netherlands doesnt tax royalty payments. So Promo group helped the musicians establish private foundations there that allow them to leave wealth to their heirs, tax-free. Over a period of 20 years, they paid $7.2 million on $450 million in earnings, a tax rate of approximately 1.5%.

Why would a business register for VAT? When do businesses have to register for it? Are there costs involved?

A business needs to be VAT registered when sales exceed 73000 a year. Failure to do this can conclude in fines. If your sales are below this it is your choice whether you want to be VAT registered or not. If you are a vat-registered business then you are technically an unpaid tax collector. When you have become VAT registered you add VAT onto everything you sell at a good rate, usually this is 20%. Then every 3 months you collect the amount of VAT you have made up and give it to HMRC. There are advantages of becoming VAT registered, because when your business is it means you do not have to pay VAT to other VAT registered businesses. For example if you make 500 in VAT and spend 200 at another business (240) then when you are giving over your VAT to HMRC you only give 460 so you are saving 40 for your business. This can be an advantage for your business, so it is a wise choice to decide whether you want to become VAT registered or not. If you want your business to look good and have a good reputation to become a larger business then again you should consider being VAT registered because not being VAT registered is telling the public you do not make 73000 every 12 months in sales.

There are downsides to being VAT registered, these are usually when you are selling cheap products to none vat registered companies i.e. usually the public, this means that the product is no longer cheaper and is slightly more expensive, this can put people of buying your product because the vat has to come out of their money and they can not claim it back. If you make your products cheaper then this can conclude in not making as much of a big profit. The main choice of becoming vat registered is if you are selling to other vat registered businesses.

Why do we pay national insurance? When should a freelancer pay it? How much should you pay?

Understanding what national insurance payments are for will help you with this answer. Freelancers different to people who are employees and have different arrangements. Again, when it should be paid and how much is not a matter of opinion. Research this and give the correct answers.

The amount freelancers pay for national insurance depends on how much they earn, freelancers pay quarterly. We pay national insurance for pensions and to help pay NHS and other welfare services.

What sort of personal insurances could you take out? How much might this cost?

Be specific here. Find out what you could get, which companies offer cover and how much it will cost. Finding specific examples will add detail to your work. Considering the advantages and disadvantages of each will give you a better answer.

Why would you take out a pension?

Pensions are more complicated for people who are self employed because you do not get help from your employer and you are not on a regular income, this will make it more difficult for regular saving, preparing for retirement however is very important, so you need to think about taking out a pension in a smart way. State pensions: when youre self employed you are entitled to the same state pensions to those who are employed. The state pension is 113.10 a week, which is not enough for your regular living, the rest of the money you have to make up for yourself. If youre a basic rate tax payer, every 100 you add into your pension, HMRC will ad 25. There are different types of pension schemes you can set up which include: stakeholder pensions, personal pensions and SIPPs (Self Invested Personal Pensions) The advantages of taking out a pension are : if you are paying tax and decide to take out a pension then the government start putting some of the tax into your pension pot.

What are projection figures and how do you work them out?

Project figures are figures that take the sales you are hoping to make and taking of the costs you need to spend, to calculate what profit you are making. These are really important for a business because it will allow you to create a business plan to ensuring you are making more money then you are spending and work out how bad a decrease in sales will be. Another aspect that makes project figures useful is it can help persuade investors into putting money into the business. Management projected sales are usually just a good estimate and are not 100% accurate. Projected sales are a lot easier to work out when you have done projects that are similar, which then you can use them projects to work out how much you earnt and spent to create a better plan for the similar project you are going to complete to make a better profit for yourself.

What things should your business plan contain?

A business plan is very important for starting up your own business, to ensure that you get the best profit and the most success out of your business. there are many different things you should add into your business plan such as: Whats your business name and location? What do you specialize in? How will you make money? Who are your clients?My Marketing Plan How will you find your clients? What type of marketing will you do to get your name out there? What results are you looking for with your marketing? (Number of clients or projects per month) My Financial Plan How much will you charge? How many days of the week will you work? How many hours per week do you expect to be billable? What are your expenses? How will you diversify your income?These are some of the questions you should think about when writing out your business plan, everyone has different needs and importance can differ in person. Creating your own business plan is essential and will help you a lot now and in the future.

What are the different funding options for a freelancer? What are some advantages or disadvantages of these?

Freelancers are most likely going to need some money to start of a business whether this is for equipment, office rent, advertising money or travel costs it needs to come from somewhere. There are many different ways that you can lend money and different advantages and disadvantages about these methods. Borrowing: borrowing money of family and friends is an easy way to get money, they are unlikely to want a lot of interest from you, you wont get into any legal trouble if you do not pay it back on time. However it can lead to family problems and arguments if it is not paid back for a long time.

Debt finance: this means borrowing from a lender, which is usually a bank or building society. By lending money this way it means that interest is added, which means that you are paying more off then you borrowed, interest is added over the time you are lending. Any takings need to be added to your projection figures. The disadvantages of this are that you are paying off more then you are borrowing and you can get into serious trouble if not paid off, which leads to bad credit history. The advantage of this is that you can borrow large amounts of money if your credit history is good.

Equity: this is where you are sharing your business with someone else, they lend money to you but in return you have to give them a percentage of your profit. This is a good thing because it means not having to pay them back, but on the other hand it wont feel like you are making much of a profit because a % is going to someone else.

Crowfunding: this is a popular method used for raising money in different industries. Depending on your type of project/business depends on where to advertise yourself and your project for raising money. There are different websites to pitch your ideas on to try and get people to fund into your project.