Being self-employed has its benefits: you’re your own boss; you can choose the work you want to do and the people you work with. But it does have its downfalls – you’re not on a payroll and keeping a steady flow of money coming in during quieter times can be tricky.
Russell Thomas is a UK freelancer in website and new media development for national companies, with 17 years’ experience under his belt in managing his cash flow. He says there are ways to make sure you have money to see you through the quiet times without worry. Here are some of his tips.
A float for your finances
Creating an emergency float for your finances is crucial to make sure you have access to cash when you need it most. Aiming to save around three months of your total outgoings can also help stop unnecessary stress.
“Most companies will take more than 30 days to pay you. But if you are experiencing a quiet time and your last client has taken over 100 days to pay that can be £1000s of pounds owed,” Russell says. “A cash float can help raise that money to tide you over and reduce worry till your next pay cheque arrives.”
Business account services and products
“You should make the most of the fact that you are a business,” Russell says. “Keeping your business account separate also allows you to see how well your business has performed, and what money you have earned and need.”
Russell advises using the best business-related services and products available – business loans, overdrafts and credit cards – as a way to get additional money when you need it, without the high rates often associated with personal account services. Some banks even offer free business banking, other banks offer free fees for the first two years on their business products and services. When your free period is coming to an end, don’t forget you can negotiate with your bank, as they will want to keep you as a client.
Your services, discounts and selling on stock
Expanding your services and setting offers on what you already provide can be good for your business during quiet times. Russell says offering additional services and setting discount seasonal prices, in January for instance, can help bring money in and attract new customers.
Russell says: “Think about what additional services you can offer a client, or other skills you have, and put them to good use in your business. Selling on extra products is also a good way to get rid of unwanted stock and make some extra money.”
If the products you sell have a shelf life, try selling them on using online services, such as eBay or social channels, or to consider doing deals with local shops. It could even help publicise your business.
Temping and learning new skills
“When I became self-employed I had a back-up plan in mind from day one, in case it didn’t work out,” Russell says. “I completed a HGV driving course and got my HGV licence, this meant, at anytime, I could get work driving a lorry if there was a quiet patch. As this is classed as a specialist skill, there are always opportunities to get temporary work, which actually pays quite well. I recommend learning a new skill like that as a way to help maintain your cash flow.”
Other alternatives could be temp roles or agency work. Having something to fall back on, or learning another employable and desirable skill to get you through quieter times can be a lifesaver.
Ts & Cs and admin fees
“Setting admin fees and updating your Ts and Cs to suit quiet business times is a good way to make sure you get paid on time, if not sooner.”
Russell suggests that if your terms and conditions state payments must be made in 30 days, perhaps change this to one or two weeks. As this is your company, you can set the terms of engagement. You can also set up an overpayment policy – charging clients for each day they exceed an agreed payment date. Just make sure you email your clients to let them know about the changes.
Ways to get your next pay cheque on time or sooner
- Chase your clients – send them regular reminders
- Be organised – create a calendar to flag up any work completed and payment due dates, so you know who to chase and when
- Offer multiple ways to make payments – from credit cards to PayPal – so your clients don’t have an excuse for not paying you
- Update your Ts and Cs to get paid sooner
- Set admin fees and charge these to clients if they miss payment deadlines
Benefits and support
If you’re self-employed and experiencing a quiet or difficult period, remember you are also entitled to government support. This includes working tax credits, child tax credit, housing benefits and council tax support, depending on your financial situation. You can find out more about this on the self employment and benefits web pages for charity Turn To Us and Citizens Advice
This article has been written by Nigel Norman, Marketing Administrator for Auto Advance, a UK Logbook Loans provider.
Being self employed is definitely a nightmare when managing money! Great tips xx
Money Saving Mum recently posted…Saving money on water bills
The most annoying part of being self employed is both the getting a mortgage and also the bloody paperwork to HMRC and Companies House every year!