Freelancing isn’t for everyone.
For one thing, you have to be sure there’s a market for your services, and ideally, your financial situation should be somewhat healthy before you start your freelancing business.
As a freelancer, you also need to remember that all the things you used to enjoy as a salaried employee will now be your responsibility. These include retirement benefits and Social Security and Medicare contributions.
To ensure you can make a living freelancing, you also have to consider time management and willingness to get organized, especially with cash flow.
That said, let’s talk about cash management to make freelancing a rewarding experience for you.
First Things First: Don’t Forget the Basics of Cash Management
Money management for salaried employees is more straightforward than managing freelance cash flow. That’s because the number one rule for freelancers and small business owners is to separate personal from business finances.
Most freelancers recommend a separate online bank just for business transactions. A traditional bank usually has extra banking fees, which is a disadvantage when you know your income will be variable. Plus, online banks don’t require a big deposit or maintaining balance, and linking to business tools like Mint or PayPal is a breeze.
Practice Budgeting and Checking in With Your Finances Regularly
Start now if you’re not putting your past income and expenses on a spreadsheet. You need that data so you can forecast your future income and expenses.
Doing this also allows you to track your cash flow. The more information you have, the better you can see trends. That means you’ll be able to check where you can cut expenses.
Besides mastering budgeting, it would help if you get into the habit of checking in with your finances once a week. This way, you can make adjustments to your expenses as needed.
Don’t Procrastinate When It Comes to Invoicing
It’s easier to maintain a favorable relationship with clients if they know when to expect an invoice.
It’s never good practice to hassle your clients to pay you asap when you forget to send an invoice on time. Remember, your clients also have a budget they want to stick to for the month.
Suppose this is your first time sending an invoice. Learning the basics of invoice design can help a lot. Another thing that would help is a detailed contract that states when payment must be made, including late payment fees.
Pay Your Taxes
Tax laws vary from country to country, so it’s a great idea to consult a tax professional in your area.
If you can set up another account solely for taxes, do it. You always want to have more money come tax time. The last thing you want is tax problems just when your business is getting off the ground.
Be Ready for Emergencies
Cash flow management can be tricky when you have variable income. That’s why you must save extra money, especially during lean months.
Also, never forget that some good clients can run into problems. They could be late on their payments, or worse, not pay you at all. You have to be ready for those times, especially when you’re counting on those funds to keep your freelance business running.
Free Yourself From Cash Flow Problems
Now that you know some cash management basics for freelancers, do you still have questions about freelancing and taking care of your finances?
If yes, don’t hesitate to check our other posts. We also have tons of finance articles that can help you.