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Female freelancer managing finances by comparing printed charts against digital figures on a tablet device

Top tips on cash management for microbusinesses and freelancers

Sound financial management is the bedrock of any successful business, whether it has one person or 10,000.

But, for microbusinesses and freelancers, 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.

Another difference is the ‘feast or famine’ way many microbusinesses earn. Planning around project pay-days and managing cash flow in between is vital.

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

1. Make budgeting 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:

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

Whether you use a simple spreadsheet with formulas or subscribe to an online budgeting tool, the key thing is to maintain the daily discipline of keeping the budget up to date.

That way, whenever a buying decision comes up, or you have the choice of whether to take on a new project, you can make smart decisions and avoid any cashflow shortfalls.

2. 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 is fairly standard. In other words, it will be up to 30 days from them receiving your invoice before they send you your cheque. 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.

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

Larger, longer-term projects can be a double-edged sword for very small businesses. 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.

4. 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.

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.

Discover how a Brother EcoPro subscription could help you make the cost of printing easier to manage.

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