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Your finances can be one of the most difficult (but most important) elements of being a freelancer or running your own business. Not only are you in charge of getting paid and paying the bills, but you also have the joy of tax returns to consider as well.
If you’re not on top of your finances, you can start to experience some serious problems with your cash flow. The good news is that the sooner you get a handle on it, the easier it will become to keep on top of your cash flow and manage your business finances effectively.
Here are some cash flow tips that all freelancers need.
Keep a cushion
When you’re starting out as a freelancer, it’s important to keep a financial cushion to tide you over in case things go wrong. Your cushion could help to cover you during periods where the workload is light, as well as during those times where people don’t pay up. Only dip into your emergency fund when absolutely necessary, and remember to top it back up when you can.
Your cushion should be separate to any personal savings that you have, as your business and personal finance should be kept separate.
Work out what your payment patterns are
After a period of working as a freelancer, you’ll start to recognise what your work patterns are. From understanding when the busy periods are to when you’ll be quiet, this can help you plan accordingly and make sure your income is spread out evenly to accommodate it.
While a period of no work can feel like a disaster, it could actually be a good opportunity for you to take a break and have some leave – something that many freelancers fail to do. Take a look at some of the things you can do in your freelance downtime that will help you make valuable use of your time.
Use online accounting software
Being able to see your finances in real-time will make it easier for you to manage them. You’ll be able to keep tabs on the invoices coming in, what needs to be paid and help you to spot potential trouble early on. Use QuickBooks online accounting software to help you manage your accounts easily. This will also benefit you when it comes to tax return time, as you’ll have everything you need to file your receipts and work out how much you owe.
Be strict with your clients
There’s nothing worse than clients who don’t pay on time. When agreeing contracts, you need to make sure your payment terms are clear, as well as highlight the penalties for non-compliance. Many freelancers will take a deposit booking as a way to protect themselves from losses, which is something to consider for your business.
Managing your freelance finances can take some getting used to, but by getting organised you can learn how to stay on top of it all. Learn how to manage your cash flow to ease money concerns around your business and to develop some good money habits.