Money plays a significant role in both setting up and running a business at any level. Unfortunately, it is also the reason why a lot of freelancers get themselves into financial trouble. Although money may not be the only essential thing in running a successful business, it certainly affects nearly every part of your business. Therefore, most would agree that money makes the business world go round.
If you want to start a freelance business, you will need some funds for equipment and supplies depending on the nature of your business. Having the financial means readily available, will also help you carry out your various marketing strategies to enable your business to grow further. Are you scratching your head for ways to maintain steady cash flow while running your freelance business? Then the following tips should help.
Know your numbers
Regularly keep track of your assets, working capital, income, and revenue, as these will significantly impact future business decisions. Truthfully, it can sometimes be very challenging to keep track of these numbers by yourself. Therefore, you can take advantage of specific professional online tools and softwares like Whatagraph to make these tasks much more manageable. These options make it possible to control your spendings while making all your business’ critical information available in one convenient location.
Create separate bank accounts
The most common mistake most freelancers make when starting their business journey is mixing their personal and professional finances. Treat your business as your business and your personal life as a separate entity. Once you get your freelance business off the ground, create a different bank account for the business. This is important as it makes your legal compliance, taxes, and other bookkeeping tasks less stressful.
Use specific bank accounts
Do not get confused. We have already mentioned how important it is to create separate bank accounts. Now, you need to consider opening an additional or specific bank account for particular business expenses. It would be of great help if you also considered setting up an automatic transfer from your primary business account to your specific savings account. Such an approach makes it possible to automate the saving of funds, the estimated tax payments, healthcare, business travel, and business license renewals. It also makes it less difficult to control spending.
Invest in the right software
There are different parts of running a freelance business that comes with routine administrative tasks. Some of these tasks are very easy to handle, while some seem to require some professional assistance. However, since you are most likely fully in charge of your freelance business, it would not make much financial sense to employ someone to take care of your simple bookkeeping and administrative tasks. You also have access to a wide range of online bookkeeping software that will make your accounting tasks less complicated and save you a lot of time and money. With an excellent online bookkeeping software, you should be able to automate regular payments, track invoices, customize your payment types, and handle simple tax-related issues, at least.
Keep three months of operating expenses at the bank
It is essential to have a secure source of funding to fall on during times of emergency or crisis. The business world is a very risky one, with uncertainties springing up when we least expect them. That is why it is best to save at least three months of your business operation expenses at the bank at all times. When you have this kind of financial cushion to fall on, you will experience less financial stress and worry over managing your cash flow. The reason is that you will be prepared for all forms of unexpected expenses like a sudden failure of your computer. Ensuring that you always have cash for a rainy day will also help you accept new business opportunities, make advance payments when needed, and bridge the gap when clients fail to make payments on time.
Hire a good certified public accountant (CPA)
As much as it is very cost-effective to do as much as you can on your own, you should consider hiring an excellent CPA at some point. Most agency owners and freelancers have a “DIY for everything” approach to almost everything within the business, causing more harm than good. A good certified public accountant will ensure that not only do you pay all your legally mandated taxes but that you also do not end up paying even a penny more than you are supposed to. A CPA has a better understanding of all the changes in tax laws, possible loopholes, potential write-offs, etc. This means that they will be in a better position to save you loads of money you will never know about if you handled all your tax issues by yourself. A reliable CPA will also provide you with consulting services all year round; this includes future investment plans, business plans, mid-year checkups, etc.
In addition, there are so many things that go beyond what your accounting software can do – for example, the financial health analysis of your business. In short, if you want to save more money in taxes, hire a professional; but if you are going to pay more taxes, then do it yourself.
Learn to negotiate
In the business world, everything is negotiable, and although this may not always work for retail accounts, you can mostly negotiate your pricing to save money on your business account. To achieve this, always make it a point to negotiate anytime you are making a business agreement with a client or business. You never know how much money you will save until you start learning how to make a deal. Always remember that business expenses are not free money. Just because you cannot avoid such costs does not mean that there are no consequences for spending that money. Therefore, to maintain positive cash flow, it is essential to ensure that you do not overspend on your business expenses. This is as important as getting more sales done to bring in more money.
Consider ongoing, long-term work
While you can sustain yourself with a good inflow of money from your freelancing business, it is best to consider having an ongoing, long-term job as well. For instance, you can consider looking for steady monthly work support or other forms of long-term engagements, depending on your areas of expertise. Focus on clients who will buy block hours every month and sign long-term contracts. Doing this will ensure that you rake in a stable flow of money for as long as the deal lasts. Depending on how time-consuming your work schedule is, you can fish for as much long-term work as you can handle.
It is important to remember that relying on a constant flow of new clients can easily lead you into a financial rollercoaster. The reason is that, unlike ongoing long-term work, trying to find a continuous stream of new clients does not come with any future financial guarantees. This is because they only offer very short-term opportunities; the amount of money you can rake in from such clients cannot be compared to ongoing long-term work. Also, the benefit of a long-term contract offers more financial security than short-term opportunities.
Use a reward card whenever you can
Reward cards can deliver excellent benefits, but only when you are smart about the way you use them. For starters, always ensure that you never carry on a balance from one month to another, as the interest rates on your reward cards will wipe out. Also known as your spending award card, you can spend this card on as many items as you are allowed to.
Keeping a consistent cash flow is not easy, but these tips are certainly worth a shot to help you build and maintain a steady cash flow.