Week Two

Business, Models, Studios, Estimating, Invoicing & Budget Management | Test & Rehearse

Notes from this week

Lecture material:

Webinar:

Contents of a VAT invoice

Research

Invoicing:

My boyfriend is currently studying his AAT level 3 in accounting, he has 3 different textbooks: ‘tax processes for businesses’, ‘business awareness’ & ‘financial accounting: preparing financial statements’. I had a look through some of his textbooks as I thought it would be relevant to this module. One thing I found particularly helpful was this summary of what should be included on a VAT invoice. I’m currently woking part time as an accounts assistant and I work with invoices everyday so this combined with the invoice summary will be really helpful when I come to designing my own invoices.

In the webinar Stuart Tolley also spoke about invoicing he also covered how important it is to have the correct details on invoices and to make sure you are using invoice numbers to keep track. Stuart also made the point that you should invoice as soon as you can and to not be afraid to (politely) chase for payments to ensure you are paid on time. You may also benefit from hiring an accountant.

Business plan ideas

The task: Create a business plan to support the planning of your own entrepreneurial concept.

Chosen business: A freelance career working with clients.

Going into this week I was still unsure about which route I wanted to take for my business plan however, listening to this weeks lectures really helped me decide. As I’m still quite new to graphic design I found this weeks lecture really insightful. The two business models that stuck out the most to me were freelance designer and the studio business model.

The aspects of the studio business model that appealed to me were; being able to work on a few small projects at a time. The freedom of managing your own time but also having project managers to support you. I also like that the studio is a smaller close-knit team and you get benefits such as a structured work week (35 hours), staff lunches, holiday, pay reviews and bonus schemes.

The aspects of a freelance career that appealed to me were; having the freedom to work on projects you love. I also like the idea that you don’t have to stick to the typical 9-5 working week, so you can make time for things that come up. Being freelance doesn’t mean you have to work entirely by yourself, you can collaborate with people on certain projects.

Page ideas:

  • About / meet the team

  • Mission statement

  • Inspiration

  • Questionnaire for new clients

  • Administrative expenses - rent, bills ect

  • Inspiration

  • Values

  • Services / products offered

  • Types of business models

  • Process / timeline

  • Invoicing

  • Financial predictions

  • Cost of sales - software, stationary ect

  • Pricing

  • Contract / agreements

  • Market research

  • Competitor analysis

  • Existing business plans

Limited Company vs Sole Trader

Limited Company:

A limited company is considered to be legally separate from the identity of the owner and can consist of one or more owners and multiple shareholders. It has a unique company identity which must be registered with Companies House. There may be one or more owner or director and they will have limited liability, meaning their personal finances won’t be affected should the business struggle financially. A limited company can still be owned by a single person, in a similar way to how a sole trader operates. The owner and the business are seen as different entities in the eyes of the law.

Advantages: Due to the legal separation between individuals and the business, as the owner you are not responsible for company liabilities. You have no personal responsibility when resolving legal issues and within a limited company you are also not obliged to use your own funds to resolve debt. The owner of a limited company can also retain the majority of business control, depending on the structure of members. Limited company owners draw their earnings in the form of a salary as well as in the form of bonuses and dividends.

Disadvantages: The first disadvantage of operating a limited company is that both your overall company profits and the income of individuals within the company are taxed. Therefore this means there are more paperwork and taxation rules to follow. There is potentially less flexibility as there are usually more people involved in the company which means there are more steps in the decision making process. Finally the administrative and legal costs needed to set up a limited company are often higher than a sole trader.

Sole Trader:

A sole trader is someone self-employed who owns their business outright, their business does not have a separate legal identity from that of the owner. This means they are responsible for all decision making processes and they take full liability. To become a sole trader you must register using the government portal within three months of founding your business.

Advantages: An advantage of being a sole trader and self-employed is that you get to keep all of your hard earned profits after tax and you also don’t have to go through the hassle and costs of registering your business. You are your business which means you can be flexible in your decision making and company processes and run your company completely how you want to. Taxation is also a lot simpler as a sole trader with the requirement of a self assessment and full profit retention after tax payment.

Disadvantages: The biggest disadvantage of being a sole trader is there is no legal separation between you and your business, which means you can be held responsible for all company liabilities. So your personal assets could be at risk if the business fails, this includes; your home, savings or other possessions. You are also responsible for keeping on top of your sales, expenses and taxes as a self-employed individual to complete your self assessment tax return. Although your paperwork may be minimal it’s down to you to make sure it’s all present and correct so you may have to pay for an accountant to help.

I will be setting up my freelance career as limited company. I have decided to do this as there is less financial risk involved as you as an individual and your business are legally separate. I would also like to eventually start expanding my team as the company grows so being a limited company is the best way to this. I would like to have another designer onboard and a full time accountant, being a limited company means I can pay everyone’s salaries and also dividends.