Show You the Money: The Basics

OK, I’m back. And I even had four days off…guilt-free. It’s a gift from above, let me tell you.

So here is the first ‘real’ post about handling finances and taxes as a freelancer after a request from one of my readers. See? I read my email and answer your burning questions! As best I can, at least.

But first, the big disclaimer:

This is meant as a general guide for beginners just starting on a freelance career in animation (or otherwise). I am in no way shape or form an authority on anything to do with your taxes or your finances. I’m pretty good with my own money but I prefer having someone else tell me what to do with it.

This is just how I do things and it’s quite possible I could be doing them better. And some of this may take a Canadian slant, so my apologies to the U.S. readers (and all you other wonderful folks). This post had some links to articles geared towards Americans so that should balance things out. I have zero knowledge about other countries on this matter.

Have I beaten that to death enough? Good.

What is the difference between freelancing and working for a studio?

If you work for the studio, you are getting a paycheque (look! I’m spelling Canadian too 🙂 ) from them that takes off all your taxes and stuff for you. You can’t write off expenses when you file your taxes either (even if you work at home sometimes). They might hire you as staff if the job is fairly long term (in this business that could mean six months or more).

Or they may not hire you as staff but as an independent contractor. As a freelancer, you must invoice the studio (or whoever) for the work you do. When you sign on as an independent contractor, you are responsible for paying your own taxes. Hear that? YOU are responsible for paying your taxes. The good news is you can write off a lot of expenses to get those taxes lower. More on that soon.

What’s in a name?

The first thing you should know if you’re going to freelance in this business is that you don’t have to register as a business. You can just operate under your own name, which makes things much easier. Some people do register a business and even incorporate that business. Frankly if you’re just going to go from job to job (as in studio to studio) doing storyboards, animating or designing I don’t really see the point.

If you’re going to do other things and really run a business, then you should register a name and get a business bank account. This is something I will probably be doing myself in the near future. I may be dabbling in some other ways of generating income, so I’ll need to be a business.

But right now, as a freelance storyboard artist, I am just me and don’t need the business bank account. And they cost money, so if you’re just starting out, I say hold off on all that.

Billing the money

The next thing you should do is make up your own invoice template. Many people use those generic invoice books, which is fine but look like crap. You’ll look a lot more professional to the accounting department if you have a professional looking invoice. It can be as easy as making one up in Word and saving it each time under a new name for your files. Print one for the client and one for yourself and keep it nice and safe in a file folder.

It should include:

• your name, address, telephone number and email (you can add some flare to this part)
  
• the date of billing
• an invoice number (you can make up your own system for that…or just start from 001)
• a Sold To: including the client’s/studio’s name and full address
• a description of the services you provided
• the price of those services
• if applicable, (in Canada) your GST charge of 5% on the above services
• the total price including the GST (nice and easy to see)
• I print my GST number at the bottom (accounting departments like that)

GST??? What? Huh?

Don’t panic. For the non-Canadian readers, it’s our lovely Good and Services Tax. If you make over $30,000 a year freelancing (you’re a service) then you need to get one. It’s not a huge deal. Google it. Find the government office you need to go to in your province to apply for one. Head on down and fill out the form. You get a temporary form with your number on it and then they mail you the official document.

Then you charge your client 5% on top of your services. IT’S NOT YOURS TO KEEP. Then you pay it back to the government minus all the GST you have paid on all your expenses. If you don’t make ‘crazy money’ (I sure as heck don’t) then you can just pay it once a year. I’m not going to go much further with this because I don’t want to say anything wrong. This is an area where an accountant comes in handy.

If you have no idea how much you’re going to make (so true when you’re starting out), then wait until they tell you to get one. After you file your income taxes, they’ll let you know if you should start collecting GST. The most important thing to remember is to not spend this money! Which brings me to…

Handling the money

But you know what? I think I’ll make this another post. Because I will get into banking, receipts, organizing everything and doing your taxes. Which would make this post a long one.

The post tease strikes again! If anyone has helpful tips to add, please post them in the comments. 🙂

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