Smart Ways for Managing Finances in a Freelance Business
In the freelance world, it's easy to get caught up and neglect critical areas of concern such as managing your finances - especially if you are just getting started.
But like in all areas of life, the evidence for success or failure is reflected in the financial well-being of the individual.
Hence, to be successful in your freelance business, you will need your money accounting skills to be in the best shape possible.
Must I go through an accounting course to manage money effectively as a freelancer?
The good news is that you don't need training on money management to become accountable and live a financially stable life.
In most cases, a simple checklist and a disciplined attitude towards spending are all it takes, except if your earnings are somewhat above average. In which case, you risk having an inflated appetite for luxuries.
However, in this article, we've condensed all the professional money-management principles into a six-step process so that whatever the figures are in your freelance earnings, you will be able to manage your finances better.
Simple ways to manage the finances of your freelance business
1. Draft a good savings plan
Aside from all the obvious benefits that come with a well-implemented savings strategy, it would help you in times when clients fail to pay in line with schedules, or when projects are just too hard to come by.
Also, having extra savings would ensure funds are always available for inevitable expenses such as web hosting fees, plugins services, product subscriptions, and even the salary of your team (if you have one).
However, this depends on your niche, so the unavoidable expenditures may be different in your case.
2. Set a monthly budget
Your income as an independent worker can be almost limitless; it's entirely up to your outputs and work quality.
That, however, is the more reason why you must plan out your expenditures for each month before your invoices get paid.
This is also known as the zero-budget method, i.e budgeting with no cash at hand.
Among other advantages, it helps to give clarity on the things you are overspending or underspending on.
The great thing about budgeting is that it helps you to live within the reality of your situation, without any unnecessary feeling of wants or insufficiency.
3. Monitor your weekly/monthly cash inflow
Budgeting helps you stay ahead of unexpected events, but knowing how much you earn (on average) makes you prepare better.
As such, keep a good track of your weekly or monthly earnings, and compare them side-by-side with the budget.
Doing so will help you identify areas that need adjustments.
Important questions to ask in this regard are: what subscriptions are you paying within the month? Are there invoices due for payment already? What are you likely to earn when the month runs out?
4. Keep a timely schedule for completing projects and sending invoices
As much as possible, ensure to finish every pending assignment before a month runs out, so you can include them on your invoice.
Unfortunately, most freelancers don't realize how this trick can drastically improve their finances and keep them afloat.
In addition, you can even go further and include a penalty fee for late payment. However, to avoid looking unprofessional to the client, be sure to discuss your late payment policy before the freelancing contract is finalized.
Also, confirm if your invoice contains accurate information; An invoice writing tool like Weinvoice makes all of these extremely simple.
Moreover, Weinvoice allows you to quickly generate invoices using different kinds of invoice templates, each designed to suit the types of clients you work with.
5. Increase the rates
It is no news that the economic situation of the world has commodities prices soaring every day. If your income is not increasing proportionately, you risk going into a financial crisis.
The way out is to increase your client base which invariably means more workload, or increase your services charge to existing clients, though it will be difficult pulling off such a trick.
To make it easy, demonstrate to the clients what they stand to gain for paying you more. Also, when next you are negotiating with a new client, bargain according to the adjusted rate.
Like with most careers, you can conveniently turn your freelance business into a lifetime career.
The major challenges would be your ability to sustain a regular cash flow, plus a finance management plan for cultivating positive spending habits.
The steps for doing that are exactly what this article covers.
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