The top reason small businesses fail is obvious but all-too-common: they run out of money.
CNBC reports poor cash flow can affect even high-revenue businesses because of simple mistakes like failing to invoice promptly.
Steady cash flow means you can pay bills on time, invest, put money into savings and reward your hard work with purchases or vacations.
A little organization can help you maintain the reliable income you need and deserve as someone who is self-employed. Use these tips for getting paid promptly and keeping your business thriving.
Being left in limbo — between invoicing and actually getting paid — means you’re forced to pinch pennies and halt future plans while you wait for money to materialize.
Diversify your clients
One way to get money more frequently is to diversify your client base. This is wise too, because it protects your business should a client abruptly stop doing business with you. Relying on one or two significant clients means you’ll have to start from scratch should a large portion of your income disappear. Having many clients means more paychecks spread out throughout a month so you’re always generating new income.
As you increase your client roster, you’ll be able to get a better grasp on what your typical payment schedule will be like too.
Be clear in your contract
Stipulate in your freelancer contract with your client how often you’d like to be paid, whether it’s biweekly or weekly for long-term projects, every time with every project that is turned in, or another type of payment installment schedule you’d prefer. In your contracts, include pricing and rates, the method you’d like to be paid and negotiate a kill fee in case a project gets canceled.
Include stipulations regarding late payments and how those affect the work you are doing. By setting up clear expectations before you even start working for a client, you’re protecting your time and your finances.
Manage Your Budget
Because self-employment can often mean unpredictability, it’s essential to know what your financial obligations are at any given time, and to stay on top of your bills. Allot the appropriate portion of your income for quarterly tax payments, and prioritize saving money for the future, including for emergencies and retirement.
The Financial Consumer Agency of Canada has a simple form for creating a budget, and using an access-from-anywhere tool like QuickBooks Self-Employed allows you to easily separate business and personal expenses to stay on track.
It’s ideal to pay for necessities before indulging in purchases that don’t directly benefit your business or take care of your family needs. Deposit income into savings, investment and emergency funds first. It is better to overestimate how much you need to save than to end up scrambling to pay the credit card bill on time. Working with a financial advisor can help you invest wisely and monitor your budget.
Get Faster Payments
Part of getting paid quickly relies on you, not just the client. You can increase your likelihood of getting a prompt payment by invoicing at the same time you turn in an assignment. You may even stipulate in your contract that you need to be paid a portion of the fee upfront before you even start working.
Regular communication with a client throughout a project also helps to increase your client’s respect of your working relationship and keep you at top of mind from project creation to payment. Some self-employed professionals even offer payment discounts to clients who pay within a few days of receiving the invoice.
Using a free invoice generator like the QuickBooks Invoice Template helps you speed up your invoicing process. The free template includes data entry for terms, rates, activity and more, so you can clearly present to your client what you are charging them for, to make it easier for them to pay you immediately. Using an easy-to-read template helps you stay organized, so you can keep track of when you have sent invoices and follow up if payment has not been received.
Respect Your Time and Your Work
Just because you’re managing your own payments doesn’t mean it’s acceptable for clients to delay your payments. And you shouldn’t have to bug them incessantly with follow ups. By setting up clear expectations, creating contracts with your clients, and sending clear invoices along with your work, you help protect your time, your work and your finances. These practices also increase your professionalism and reinforce the relationships you have with your clients.
To learn more about how to simplify your finances and save more for your business and yourself, visit our Self-Employed hub.