When it comes to managing the business, never have plumbers had as many reporting obligations and demands for their time. Getting your finances right is no laughing matter when you’re self employed or a contractor working for a single or multiple employers, when you’re being paid electronically, by BACS, direct debit and of course in cash. An average plumber processing scores of invoices a week can take a couple of hours, usually on the weekend, to format and mail invoices, file receipts and expenses, reconcile bank accounts and prepare material for the accountant. Sound familiar?
That’s not their only hurdle. A tougher HMRC outlook that clamps down on cash in hand payments is on the cards, while IR35 rumbles on, the recent judgement against Pimlico Plumbers having done little to clarify the situation. Banks don’t help, with Ts and Cs that make it hard to conduct business from a personal bank account, or even to open an account without stringent credit checks in the first place. Unlike SMEs or corner shops processing hundreds of transactions a day, freelancers with an average of 20 or so business transactions a week have always been caught in a financial exclusion trap.
That’s the bad news, but times are changing. The advent of the gig economy means the growth of self employed people will soon eclipse the growth of SMEs. This year, freelancers contributed £119 bn to the economy a year, a rise of £10 billion from the previous year, according to a study by industry body IPSE. Freelancers are rapidly becoming the mainstream, not the exception, and are prompting a financial revolution.
Brand new financial technology firms are appearing from nowhere armed with good ideas and a positive approach to finance, to help a mobile workforce with connected, mobile financial apps that can be accessed on the move. These days, your smartphone can manage your finances in ways that were not even possible three years ago.
Financial apps sound futuristic, but they’re here. Anyone can download them. They provide a positive experience, housed in an app store that is geared around fulfilling, not frustrating, your needs, and best of all, they increasingly cater for the business professional, designed to enable entrepreneurism. Our app, Albert, enables thousands of freelancers to invoice and expense on the go, linking their accounts with those of their customers for ease and speed. Expenses can be photographed and indexed, invoices can be sent, tracked and monitored, alerts buzz when money has been received or once an invoice has been opened, (making it harder for a customer to say it has not been received). And Albert is precisely two years old.
Financial apps can be connected to your current or business account. In our case, what goes out, what comes in, and what’s pending can all be tracked in real time, giving you a rounded, accurate picture of where you stand. The cost of hiring accountants’ costs can be kept in check too, with a single electronic download - not a shoe box full of receipts.
Financial technology, the first revolution, has prompted a second. You may have heard the term ‘Open Banking', a watermark in the transformation of financial services, of which you need to be aware. Six months old, it’s a set of rules laid down by the financial watchdog that require the big banks to share data with competing third parties, most of them new breed apps and other cutting edge financial B2B providers. The idea is to make it easier for new thinking to transform a stale market, and it does so by shifting the balance of power from the bank back to you, enabling you to engage with these smart new breed financial providers with your own personal financial data, and benefit from all manner of emerging aggregated business services based around data sharing models. It’s still new, but it’s worth researching, because before long you will be able to shop for new products and services in the same way you hunt down a good insurance deal on Confused.
So while you might work alone, the financial world is transforming to include you. While you might not sit in an office surrounded by colleagues, you’re part of a growing army of self employed entrepreneurs. That’s why financial innovations and arrangements are increasingly coming your way, designed to stop finance from being a chore. Sure, bank branches are closing, cheques are being phased out and the government wants to stop cash in hand payments for work, but times are a changing for the better, leaving you free to focus on your career, not your admin.
Written by: Ivo Weevers CEO and Co Founder, Albert, the book keeping app for solo freelance professionals getalbert.com
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