It is something that we have briefly covered before as part of a wider look at the often-fluctuating finances of a small business owner or self employed individual but the question of cashflow is an important one.
For many start-up business owners and freelancers cashflow can dramatically change from one week to the next, especially at the beginning of their journey. When you are first building a relationship with a client you don’t know whether they are likely to pay on time or at all, and most clients refuse to pay anything up front. Until you’ve built up some trust in people it is difficult to remedy this problem but there are a few things you can do as you grow into your role and become more confident as a business owner.
Many companies have 30 day payment terms where they won’t pay for the job you’ve just completed until 30 days after completion and invoice. So you might not see the payment for all your hard work until nearly 2 months after starting a project for a client. This can be incredibly frustrating, especially when you learn that some companies then miss payments, or receive your invoice slightly too late to make that month’s payment run.
Learn What to Charge and When
Although difficult at first when you’re building up your client base, eventually you will be in a position of trust with your clients where you know they will pay you on time and they trust the quality and timeframe of your work. In this case you may be able to request payment up-front or payment of a deposit up-front. Not all of your clients will feel comfortable with anything other than paying for your service after the event, but you’d be surprised at how many are willing to be flexible.
Negotiate with Companies that have Payment Periods
Some companies may be able to help you out with their payment periods. They may be able to reduce these down for you or in some cases even have a special agreement with you whereby you don’t have to wait the full period of payment set out when you first worked with them. It’s all about correspondence and building up relationships with your clients. The better you get on with someone, the more likely you are to help each other out.
Look After the Good Payers
Which leads on to you looking after your good payers. Some clients will always be a pain to deal with. Don’t get me wrong, you’re happy to continue working for them, but when it comes to choosing which project goes at the top of your schedule you’re going to choose the client who you have a good relationship with and pays well, and more importantly on time. Keeping your good clients onside is a great way to keep them long term and make them more likely to recommend you to others. They might also be more willing to negotiate your payment terms.
Get into a Routine of Paying Yourself like an Employee
This is a difficult one for any new self-employed individual or small business owner. It is easy to get into the habit of taking money for yourself whenever a client pays you. This might help short-term financial restrictions but over the long term it is a bad habit to get into. The best way to get yourself into a solid routine is to pay yourself like you would an employee, or as you used to be paid when working for someone else. Whether this is weekly, fortnightly or monthly is up to you, but try to stick to it as best you can.
Be Confident and Stand Your Ground
All of the above is about confidence, something that you will grow into the longer you own a small business or work for yourself. At first it can be hard to talk to the accounts departments of companies you are completing work for without sounding too pushy. But you have to remember that they are used to dealing with their own clients and suppliers and at the end of the day you are asking for payment you have completed work for. You have every right to be forceful as long as you are professional. A client will understand and respect this and if they are receiving a high quality service or product from you on time that is all that matters to them.
Remember, there will always be tough times and good times, so it genuinely pays to be well prepared and do everything you can to ensure your cashflow isn’t affected significantly during those hard times where work has slowed down or clients are not paying on time.
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