Freelancer’s Guide To Cash Flow Management

Managing the financial aspect, especially the cash flow of a remote job, is what many freelancers shy away from. Most believe all they need is a good invoice for a client, and everything is all set.

As a professional freelancer, that is not all the case, as other business parts need to be fully documented if you want to keep earning more money. This guide focuses on the cash flow management and other financial coverage expected of a freelancer. 

What Is Cash Flow?

Cash flow for a freelancer is the total amount of money made (inflow) and the total amount spent (outflow) on expenditures. So, a positive cash flow means more money is coming in than the amount spent, while a negative cash flow indicates more outflow of money than inflow. 

Managing your cash flow demands consistent work from clients, documenting your income, expenses, miscellaneous, and setbacks, which are expected to happen one way or the other in your freelance journey. 

For some remote workers, a cash flow encompasses investments and interests from products sold out. To sum up, cash flow is crucial in a freelancer's liquidity, flexibility, and performance.

Effective Strategies for Managing Your Cash Flow

There are key factors you must consider when managing your cash flow, so sticking to them would also keep your cash flow very organized.

Below are tips for managing your cash flow better.

Craft a Budget

Not crafting a budget will make it difficult to take your cash flow management seriously as a freelancer. A budget lets you see your expected revenues and expenditures for a certain period. 

If the ratio of your revenues to your expenditures is unfavourable, boosting your cash flow can be accomplished by working to increase your number of clients and decrease your expenses.

Multiple Clients

When working as a freelancer, having just one client that gives you enough tasks might seem like a dream come true. However, having multiple clients can offer can have a huge impact on having a positive cash flow. 

On the other hand, one big client is often less predictable and may have conventional payment procedures. A varied client roster that includes project-based businesses is often stronger protection against the risk of placing your confidence in one client. 

Agree on Payment Terms

Your payment policies should be clear to all your clients from the onset. These should be made clear at the first meeting with discussions about the terms and conditions of the contract and the invoice. 

Payment terms, including interest rates for overdue balances, should also be written at the outset of a commercial agreement to avoid disagreement.

Issue Prompt Invoices

Building a reliable invoicing and payment system is a great first step toward better cash flow management. Since it is difficult to predict revenue and expenses when the volume of work varies from month to month, it is best to send out bills in advance.

Knowing where and when money is due allows you to manage your workload better and identify your most reliable paying clients. Also, clients who are chronically late or non-payers are easier to spot.

Always send the customer an invoice as soon as the job is done, including your name, a unique invoice number, the client's name, and the due date.

Pro Tip: Always ensure to send your invoices through email and have a record of the date and recipient(s) in case of a payment dispute.

Have A Bank Reserve

Having a bank reserve of enough cash is a gold mine, especially when there are few clients to work with for a period. As a freelancer, you can rely on this pending when there is more cash inflow. 

You can do this by deducting a particular percentage from each payment to be more accountable. 

Having a full bank reserve requires you to make more money. There is a video for you about 10 best websites to make money 

Bottom Line

Managing cash flow as a freelancer is essential in maintaining stability with regular inflows and outflows of money. By sticking to the above tips, you are sure to have a good finance spreadsheet.  

There is a blog content about seven tips to maximise your earnings as a freelancer, which you might be interested in. 

At Ratefy Technology we are concerned about your productivity as a freelancer which is why we have a solution to help you with a stress-free conversion of your foreign earnings from sites like Payoneer or Upwork l to Naira at a competitive rate.

So after that job delivery, you don't have to worry about getting your funds to your local bank account. 

If you find this helpful make sure to share this with your freelancing buddies