Nine ways to improve your cashflow

Posted on: January 11th, 2011

Every freelancer knows what it’s like to have cashflow problems. You may have invoices worth thousands of pounds (or dollars) owing to you but your bank account is just about up to its overdraft limit.

Here are a few tips on how you can improve your cashflow:

  • Always invoice promptly. The sooner your invoice is with the client, the sooner you should receive your money.
  • Make sure your clients pay you by electronic transfer. Payment by cheque can mean a delay of almost a week by the time you’ve received it in the post, gone to the bank, and then waited for the money to clear. And cheques also go missing in the post.
  • When you submit your quote for the project, state in your accompanying¬† terms and conditions that you invoice 50% of the project upfront and 50% on completion.¬† If it’s a long project, I generally invoice 1/3 upfront, 1/3 half way through and 1/3 on completion.
  • State your payment terms clearly on your invoice (eg: 14 days, 30 days etc).
  • When you invoice your client contact, also send a copy of your invoice to the account payables person. (If your contact forgets to pass the invoice on, the accounts payable person will have it in their system.)
  • If you haven’t received payment, always chase up and ask when you can expect to be paid. (Some accounts departments wait until they have been chased three times before they action any payment!)
  • Try to negotiate a monthly retainer, rather than always being paid on a project by project basis.
  • If the project has gone on the back burner but you’ve already completed most of your work, invoice for the time you have already spent. Again, I include this point in my terms and conditions which accompany my quotes.
  • Avoid working for companies that are deliberately slow in paying.

What are your tips for improving your cashflow?

Related post: How do you get paid on time?

2 Responses to “Nine ways to improve your cashflow”

  1. Richard Hollins
    January 11th, 2011

    These are all really good tips. It’s also worth making sure that you understand what the client’s processes are. Quite a lot of the companies I work for issue purchase orders and only accept invoices with the PO quoted on it. Getting the PO issued in time is half the battle.

    It’s also worth remembering that there is a statutory right to charge interest on overdue balances. I’ve done this a couple of times. It’s rarely a massive amount of money but it is some compensation for the delay.

    Finally, you can charge late payers more for future work. For one client who persistently pays late, I’ve started factoring the time I know I’ll spend chasing them into my quotes.

  2. Freelance FactFile
    January 11th, 2011

    That’s a good point about remembering to include the PO number, Richard. If there are delays with my client contact providing me with a PO number, I go direct to the person in accounts. That’s why it’s always a good idea to get to know the accounts payable person. :)

    I used to always state on my invoices that I charged interest on overdue invoices but, with interest rates currently so low, I have now taken this off.

    And, yes, I agree with your point about including a ‘hassle factor’ in quotes. In some cases, this might be for chasing payment and in others because a client a) likes long phone conversations or b) is always changing their minds and making countless amends to copy or c) sends lots of ‘can you just’ type email requests.

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