Unpredictable. That one word underlines pretty much everything to do with your freelance life, especially when it comes to managing cash flow. The uncertainty surrounding your income – the size of it, the frequency of it, the search for it – is an ongoing issue but with planning and foresight, that uncertainty can be reduced and you can even introduce a touch of predictability to proceedings!
Look ahead
Do a financial forecast on a regular basis. Look at where your income is expected to come from over the days or weeks ahead, and when it might be paid. At the same time, chart your expected outgoings. That unpredictable word comes in to play here and there might be outgoings you can’t plan for. Look at past financial records and detect patterns that will help you prepare each new forecast and plan ahead.
The cheque is in the mail
Clients like paying bills as much as you do. Be prepared by having enough cash reserves to cover the bills while you wait for the average or tardy client to pay you. Allocate a portion of everything you earn to this ‘rainy day’ account instead of splurging – once you have built up enough in reserve, you can revise the amount you put away and enjoy your financial rewards a little more. But in the early stage of your freelance career – in fact, at any stage – a little prudency goes a long way.
How long will it take?
Knowing how long each job will take is an essential part of managing cash flow as a freelancer. By accurately estimating the duration of each job, you can then calculate how much you will need to charge to cover your expenses and living costs over that period. By taking four weeks to complete a job you thought would take three weeks is effectively depriving yourself of a week’s income. Think long and hard and be conservative when making the estimate.
Look out for outlays
Whether it’s paying for photocopies at the library, or paying other freelancers to do some parts of the job, you will more than likely have outlays. These outlays can erode that lucrative figure you’re expecting on pay day. Examine every aspect of the job before you start and work out your potential expenses. This will help you budget and reveal whether the project is actually worth undertaking.
What’s next?
While you work devotedly on the job at hand, you may be forgiven for taking the occasional glance at your next assignment. Knowing when to apply for your next job is another very important factor in managing cash flow; after all, pulling out of your next assignment because you have yet to complete your current commitment is not good for the bottom line. Make sure you are well on track with what you are doing now before applying for your next project.
I can hear what you’re saying. “This is just common sense!!” Of course it is. But the number of freelancers who are no longer freelancers because they ignored basic financial advice is staggering. So take a hint or two and enjoy a successful, if somewhat unpredictable, freelance career.
