Top tips on cash management for microbusinesses and freelance workers

But, for microbusinesses and freelance workers, managing finances presents a different challenge from that facing larger companies.

For one thing, companies of just a few people won’t have a dedicated financial manager, so they need to handle the money side of things themselves, alongside the fee-earning work.

Here are our top cash management and forward planning tips for microbusinesses and freelancers.

Make money management part of your day-to-day

Much of the art of good financial management comes down to making good, well-informed decisions, and this can only be possible if you are on top of your budgeting.

There are many cloud-based budgeting platforms out there boasting a wide range of bells and whistles. Fundamentally, however, there are three things you need to always know:

• How much money do you currently have available?
• How much are you expecting to bring in over the next month?
• What upcoming costs are you going to need to cover?

Be aware of payment windows

Rarely will clients pay you for work delivered immediately once it is completed. Instead, most companies operate periodic payment rounds which mean they can only commit to paying within a certain maximum period.

Paying suppliers on a Net 30 basis (30 days on receipt of invoice) is fairly standard. In other words, it will be up to 30 days from them receiving your invoice before they send payment. However, some businesses will only commit to Net-60 or even Net-90 payment, so it could be three months before you get paid.

Obviously it’s important to factor this into your planning, so always check the contract and ask for the terms if they’re not made clear. It may even be possible to negotiate a shorter window, depending on your client.

Ask for full or partial up-front payment for big projects

Larger, longer-term projects can be a double-edged sword. While they provide a nice big chunk of income in a single agreement, they also expose you to added risk should anything go wrong – whether that’s a minor over-run at one end of the scale or refusal to pay at the other. The best way to mitigate this risk is to arrange payment in advance.

Of course, not many clients are going to be happy to pay up front in full, but they may be willing to agree to payment terms that involve regular payment throughout the project.

As well as easing your cashflow and reducing your exposure to risk, it can also help the client stay committed to following through and seeing the project through to completion.

Investigate subscription services

Unexpected large cash outlays to purchase necessary equipment can easily be enough to upset the delicate balance of a freelancer’s incomings and outgoings, so subscription services can be a great way to spread the costs and make them easy to forecast.

The subscription business model is growing in popularity, and for good reason. They allow home based workers or freelancers to predict and control costs, without a loss in productivity.

And subscriptions can be taken out for many essential day to day tasks. Take printing as an example. Many microbusinesses will rely on printing for labels, packaging and invoicing, but may not have the upfront capital to buy in bulk. A subscription service can help with this, reducing the outlay to one low monthly cost, while giving the peace of mind that they will never run out of the supplies needed to carry on.

For example, our EcoPro subscription service turns printing into an easy-to-forecast monthly payment, helping spread the cost of the printer out over a year and making budgeting easier. For as little as £1.99 a month, discover how a Brother EcoPro subscription could help you make the cost of printing easier to manage.

Interested? Try EcoPro for free today!