Freelancing in Malaysia is not hard but as in many things, there’s a steep learning curve when it comes to managing finances. Many freelancers tend to have a “whatever works” system they live by. This however leads to undesirable side-effects, like:
- Losing money to ridiculous fees
- Lack of protection and recourse for clients who don’t pay
- Indirect loss of income due to perceived lack of professional image
It’s hard to write about the complete range of tools every freelancer needs simply because there are all kinds around – freelance writers, graphic designers and artists.
Some freelance with companies like Uber, work part-time as insurance/unit trust agents, do promoter-type work for events, or even MLM-type “business opportunities”.
For this article, the focus is on must-have financial tools for online-based freelancing jobs, although the tools can be handy for any freelancer.
Tools to receive payment
• Online Banking
Online banking is the best tool to receive payment from within Malaysia. If you can, have a dedicated bank account and credit card for work expenses and income – this makes separating personal and business expenses during tax season easier.
Always log-in and check whether you have received payment from clients – sometimes people claim they have made a deposit, when they haven’t. Pictures of bank slips can be forged.
Having a current account is better than a savings account as you can issue cheques. However, you will need a “referral” from someone else in order to open a business current account. If you don’t have one, look for banks that offer non-referral current accounts.
You might want to look into Standard Chartered’s Just One account. It’s free and comes with a Savings Account and Current Account, so you can issue cheques.
PayPal is one of the most common forms of payments for many online clients. You can link it to your Malaysian bank accounts for direct bank deposits (fees apply).
One thing you must know is that PayPal has a ridiculous exchange rate. If your client sends you USD100, and XE price currently shows the MYR equivalent is RM415, PayPal will show it closer to RM400. This is their indirect fee.
Two common ways to use PayPal:
• Use their invoicing platform and send your invoice directly to the client for payment. The fee is 2.9%+$0.30, so it’s quite high.
• Send clients your own invoice and ask them to make payments to your PayPal email address.
Between the two options, the second is better UNLESS your client can absorb the fees. Then it’s pretty much equal. You’re still be subject to the indirect exchange rate fee though.
• Bitcoin wallet
If you pay using bitcoin, you can avoid the direct and indirect fees of PayPal. What’s more, bitcoin is easy to convert to MYR when you want to spend it. Bitcoins can also be converted into USD (or GBP/EUR) – if you want to keep your money diversified.
Being open to bitcoin payments also gives you a little more flexibility in terms of online jobs you can take. There are now bitcoin-specific job boards that are less crowded than usual job boards. Less competition is usually a good thing.
There are many bitcoin wallets you can choose from, Wirex being one of them, but feel free to get other multi-sig wallets. The downside is that bitcoin can make your finances more complicated, so if you want to keep it simple then avoid this option.
After completion of work, clients ask for an invoice. There are plenty of free invoice generators out there. You can also make your own invoice with Word or Excel. Always send your invoices in PDF format.
Here’s a sample of an invoice you could use:
Tools for tax purposes
• Register for a sole-proprietorship and open a file at LHDN
This is good for tax purposes and doubles as a selling point to increase your business’s legitimacy. State clearly that your business is registered – this will increase your clients’ confidence in you. Registration for two years costs only RM130.60.
Technically, if you make less than roughly RM34k per year (this figure changes every year), you don’t have to pay taxes. You don’t even have to open a file with LHDN. But open one anyway. It’ll save you a lot of headache in the future.
• An updated ‘Business Incomes’ Spreadsheet: to record how much you earn
To find out how much you actually make a year, keep a tally of it. For simple, uncomplicated businesses, use BlogJunkie’s Simple Accounting System for Freelancing Business.
• An updated ‘Business Expenses’ Spreadsheet – to know what to deduct during tax season
If you make more than RM34k, you have to pay taxes. The good thing is you can claim a fair number of items and deduct them as business expenses.
But to do this, you MUST keep an updated Business Expenses spreadsheet. This tip can help save you hundreds and even thousands of ringgit in tax payments. BlogJunkie’s Simple Accounting System also explains how to keep tally of your business expenses.
Some of the things you can claim are:
• Office expenses (hardware, software, furniture, etc for work)
• Telecommunications for work purposes
• Toll/parking/petrol for work purposes
• Vehicle maintenance
• Gifts to clients, meals and entertainment for clients (max 50%)
• Utilities (max 50%)
• Data Storage
Keep all spreadsheets, invoices, receipts, proof of payments, and important stuff in cloud storage. You can use Dropbox, Google Drive, or any other cloud storage system for this. You can even keep it in your hard disk or USB, but cloud storage is recommended to make it easy to access and edit across different devices.
Tools for your protection
If you are working for a new customer and are unsure of their payment reputation, it’s best you prepare a contract or at least put it in black and white via emails. There are clients who ghost on freelancers after work is done, or who suddenly decide on a lower rate come payment time.
If you don’t have contracts with your clients but agree to work based on a trust system, you will have no choice but to hound them for payment in every way when they don’t pay up. Or reject future work from them until payment is made. Depending on how it plays out, you may continue or terminate that work relationship.
The thing about contracts is that yes, technically it can protect you. However, even if you take them to court, it won’t be cost-effective for you as there will be legal costs. So yes, we’re talking about protection, but the recourse mechanism through contracts takes so much time, money and effort that it may not be worth the effort if it’s for a small amount of work i.e. under RM1k.
It’s a great time to freelance in Malaysia. The internet makes it easy, so you can join the global workforce and be open to receive work from international as well as local clients. Your earning potential is virtually limitless.
This article first appeared in ringgitohringgit.com
Suraya is a corporate writer-for-hire and the blogger behind personal finance website Ringgit Oh Ringgit. She is more of a minimalist, less of a consumerist, a konon DIY enthusiast, a let’s-support-small-businesses-over-big-corporations kinda girl. Prior to her current role, she worked in various capacities within the non-profit industry.