Not everyone is cut out for the 9 to 5. Not everyone flourishes in an office environment. There are many, including those whose skills are creative, who find the traditional career ladder stifling. If you’ve worked for years under the corporate yoke and found that it has resulted in your being taken for granted by your employer and becoming bored by your work and disillusioned by your employer, you are far from alone. These intelligent, talented and dynamic individuals often thrive not on the traditional career path, but on the path of the freelancer.
Think of it!
The freedom and autonomy to choose your own projects and working hours. The chance to make good money from home (or anywhere else) doing what you love. There’s definitely a certain satisfaction to be gained from sitting in your home office, sipping your coffee at leisure while legions of bedraggled commuters scramble to work outside your window. Freelancing can lead you to living your dream life. But being a freelancer comes with its own challenges, too. You can never afford to take your clients for granted and need to keep hustling for new work as you grow your personal brand. You’re a small business and need to think like one. And one of the many considerations that small businesses like yours need to keep in mind is maintaining a healthy cash flow.
Why cash flow is so important for freelancers
When you’re a freelancer, you don’t have the luxury of a steady paycheck like your salaried friends. You probably won’t know exactly how much you’ll earn next month, nor will you even be guaranteed that you’ll have an income of any kind 6 months from now. To be a freelancer is to live in a constant state of uncertainty where your income is concerned. At the same time, you’ll still have personal bills to pay and business expenses of all kinds to pay for. Maintaining a healthy cash flow can help you to keep your finances harmonious and make your days much less stressful. Here are some ways in which you can reduce expenses, improve your income and enjoy a profitable future as a freelancer…
Use free stuff
Being a freelancer in the 2020s is a potentially expensive prospect. You may need to invest in the latest technologies and software to give you an edge over your competitors. However, this doesn’t necessarily mean that you have to spend a fortune, especially when it comes to software.
There are all kinds of free programs you can use which do the job just as well (or even better) than their expensive equivalents. For example, copywriters should never spend a penny on MS Word when Google Docs does the job just as well for free. Insightly is just as good as any paid CRMs and Trello can keep you in peak productivity without costing you a red cent. Take a look at some of these awesome free resources for freelancers.
Avoid over-ordering on supplies
When you’re starting out, you’ll want to cover all your bases in terms of business spending. But there’s such a thing as over ordering on supplies like paper, printer ink, pens and pencils etc. If you want to keep costs manageable, you’ll need to master the art of knowing when to order and how much to maximize cash flow. Remember that if you’ve over ordered you may be able to sell your items on to third parties to offset your loss. For instance, you can sell printer ink cartridges as long as they have not been used. If you bought in bulk, you may even find that you turn a profit.
Keep track of your expenses to avoid overpaying on tax
Speaking of supplies, the importance of logging all of your expenses cannot be overstated. Those who are new to freelancing may not be aware just how much they can claim in their business expenses, thus avoiding overpaying on tax. Your new phone, your new tablet or laptop, your business related phone bill and internet expenses, even books and magazines which inform your work may be considered research. An accountant can help you to ascertain which expenses can be claimed and leveraged against your tax liability so that your profits aren’t crippled by a huge tax bill.
However, if you want to avoid excessive costs, you may want to look into your own bookkeeping software. This will ensure that your expenses are properly logged and help to make tax compliance easier. You can even get free accounting tools which make this easier for you.
Don’t be afraid to charge what you’re worth
Of course, managing your cash flow isn’t just about what you’re spending. It’s also about what you’re earning. It’s all-too common for nascent freelancers to start off on the back foot by under-charging for their services. They assume that because they’re new to freelancing that their skills are inherently worth less than those of their more experienced peers. However, this is a fallacy that can hobble your freelancing business. If you start out trying to undercut your competitors on cost, you’ll find it harder to be profitable. You’ll have to do more work for less money and bottleneck your profits. You won’t be able to raise your prices as you get more experienced for fear of alienating your clients. So take the time to research what your competitors are charging and how your work measures up with theirs in terms of quality.
Unless you charge what you’re actually worth, there will always be a bottleneck around your cash flow.
Establish clear guidelines for payment
Finally, one of the greatest frustrations for freelancers is missed or late payment. And the time you spend chasing late payments is all time that you’re not spending on profitable activities. So make sure that you have clear guidelines in place for when and how you expect payment. Leave no ambiguity or wiggle room. Give less scrupulous clients an inch and they’ll take a mile. When you’re getting paid on time, however, cash flow is much easier to manage and project.