Managing your cash flow as a Freelancer can be tricky especially if you are just starting out. Here are a few top tips to help you keep your cash flow under control.
Tip 1- Save, Save, Save
It is important that you are aware from day one that you will have to manage your cash flow wisely. This will mean that you need to have enough cash flow to pay for all your expenses. Before embarking on your journey as a freelancer, you should ensure that you have some savings to pay for expenses for the first few months. Then you should set aside an amount to save as soon as you can. This is wise as it will help you build a source of cash if times are difficult.
Tip2 – Make Payment Terms Clear
When first taking on a customer, ensure that your payment terms are stated clearly verbally and in writing if possible. Your payment terms should also appear in the terms and conditions of contracts signed and on invoices issued. This will ensue that your customer is aware of how and when they should pay you for services or work rendered. It is also important to include a separate clause in the terms and conditions of your contract with your customer relating to late payments and interest charged on these.
Tip 3 – Invoice asap
Issuing an invoice to your customer as soon as work has been completed should be your key rule. This will ensure that your customer has plenty of time to settle payment. Each invoice should have a unique invoice number and state your name or your company’s name/co. number and address. The customer’s name and address and invoice date should also appear on the invoice. The quantity, description and total amount excluding VAT for all goods/services rendered must be clearly listed on the invoice. Ensure that you send your invoices via email so that you have a date and times as well as a contact name if a dispute arises with your customer.
Tip 4- Forecast your Cash flow
It may appear at first that a forecast of your cash flow is difficult to achieve. However, most of the expenses that a freelancer pays are fixed per month. This makes forecasting your cash flow needs much easier. You will be able to clearly foresee your expenses and hence be able to gauge how much incoming revenue you will need to raise to cover these amounts. This is a good way to ensure that you do not have difficulties later on and you keep up a good reputation with your suppliers.
Shoaib Aslam is the co-founder of Pearl Chartered Accountants, a UK-based chartered accountancy firm that has multiple locations across London. They are experts in helping startups and established businesses with all aspects of growth, strategy, scaling up, accounting and tax planning.