Getting paid enough and on time are two of the biggest headaches freelancers have. When we are between big projects, have a month where the pickings are slim, or take a long time to see payment for a project, we can easily run into cash flow problems. After all, we aren’t counting on a regular paycheck coming in every two weeks or even every month. But our rent, bills, and empty tummies don’t care about that.
Not only that, but there is always the chance a client will bugger off without paying us at all! Forbes reports that a whopping 58% of freelancers in Southeast Asian countries have experienced not being paid for their work. They also say it’s universal problem, not isolated to that area of the world. Bill.com reports that 54% of freelancers say it takes too long to get paid.
These are all nightmare scenarios we do NOT want to deal with. Add to this the fact that 35% of freelancers struggle with financial management and you have a recipe for disaster. Fortunately, there are steps we can take to help ensure we always have sufficient cash flow, no matter what happens with clients and payment.
Take a look…
1. Start a Savings Account
Yes, this seems intuitive, yet you’d be surprised how many people don’t have any savings. In the U.S., an astonishing 35% of Americans have less than $1,000 in savings and another 34% have no savings at all. That’s 69% — two-thirds — of Americans with little or no savings!
And this isn’t a problem that is isolated to the U.S. In Canada, 24% of people have next to nothing saved. As for Britain, nearly a third of people have less than £1,500 and 15% have no savings at all.
So, just like you set aside a percentage of what you earn for your taxes (you do that, right?) you should also set aside a percentage in savings. Even 5%-10% a month can make a huge difference when payments are few and far between. The key is to choose a percentage and be diligent. Put it away EVERY month!
2. Manipulate Your Schedule
The very first priority when scheduling client work is to ensure you meet their deadlines. Period. However, there are other factors that can come into play, and scheduling your work so you can get some cash in more quickly is fair play. As long as your clients are happy, you can schedule the work any way you want. This means you can get something quick done, so you can bring it the $$. You can read more about it in my blog post on prioritizing freelance work.
3. Charge What You’re Worth
Remember, if you aren’t charging enough for your services, you will be slaving away too many hours a week just to make ends meet, never mind putting savings away. You need to be sure you are being paid fairly for what you do and that starts and ends with you. Check out my post on charging what you’re worth when it comes to setting your freelance fees.
4. Get a Deposit & Set Milestones
Whenever you start with a brand new client, you MUST get a deposit. After all, you don’t know this client and they don’t know you. It’s a way to establish trust and a way to ensure you have cash coming in on a regular basis. About the only time getting a deposit might not apply is when you are working on a freelance platform that uses escrow to guarantee payment.
A deposit ensures you get some money upfront, so you have pay in the bank while you work on a project. And this doesn’t have to be done only with new clients. You can make it a regular practice, even when you work with clients again and again.
I generally charge 50% up front for projects under $500, with the remainder due on final delivery and approval. For larger projects, there is a deposit and milestone payments set up. So, if a project will cost $1,500, I will take a 10%-20% deposit and split the remainder into three milestones of 30%, 30%, and 20%-30%.
With a deposit and milestones, you will be getting a consistent flow of cash coming in, while you are working on a project. This saves you the horror of having to wait for a single large payment to come in after all the work is done.
5. Get a Monthly Retainer
Finally, if you offer a service that you will provide on a regular basis to a client, you can charge a monthly retainer. This is a flat fee you and your client have agreed on that will be paid out to you monthly and it is definitely something you should shoot for with as many clients as possible. This is something I am getting ready to do for blog posts, email campaigns, and the like.
So, as a writer, say a client wants you to write three blog posts of 1,000 words each every week. You can work out a flat fee for those 12 or so posts every month and the client will pay that rate on a certain date each month. You get steady and predictable pay and the client knows what is going out each month. It’s a win-win.
As freelancers, there is nothing we can do about the instability of our income. There will always be ups and downs, difficult clients, and quiet months. What we can control is how much we charge, when we collect our pay, and how much of it we set aside. So, take control and make sure your cash flow is adequate to meet your needs.
And if you have other ways you ensure you have a good cash flow every month, please share with us in the comments section!