How to Manage Your Freelance Finances

Wethos
Wethos
Feb 7, 2018 · 3 min read

Ways to safeguard against not having a consistent cash flow and how to manage quarterly taxes and forecasting for the future.

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This article was written by featured writer Ashlee Christian

Whether you’re a moonlighter like myself, or a full time freelancer you need to be smart about how you manage your finances. While freelancers report making 17% more an hour than their full-time counterparts, they will also make 28% less over their career because they typically work less hours. Freelancers also have to pay for all the stuff that a traditional employer would cover on their behalf (insurance, equipment, desk space, etc). In order to maintain a good balancing act to ensure that you have more cash coming in than you do going out, proper financial planning is essential.

Establish payment terms up front

Milestone Payments

For bigger projects, milestone payments are a great way to help regulate cash-flow. This works especially well for projects that have defined phases. Each phase should be very clearly defined within your contract, and include payment amounts and terms.

Pre-Payment Discount / Post-Payment Penalty

Everyone likes a discount right? Well you can incentivize your clients by giving slightly discounted services for early payments, early payments could mean before services are even rendered, or perhaps if your payment terms are normally 30 days however, there’s a discount if the client pays within 5 days of receiving the invoice. On the flip side you could write a provision into the contract that stipulates that any payment made after a certain amount of time will incur a penalty.

Much of the time just having the conversation up-front with the client as you are figuring out the rest of the project specs will do the trick. Make sure you know exactly who you will be invoicing, and that the client knows when you plan to send the invoice after the project is complete, as well as what the payment terms are.

Keep track of your W9s!

Also, If you aren’t already talking to a tax professional about filing quarterly taxes, you should be. I promise you that extra 17% an hour is going to seem pretty paltry in comparison to what you owe the IRS at the end of the year if you don’t make quarterly payments.

Forecast and budget

Freelancers, how do you manage your finances? Leave your hot tips in the comments & join our #NonprofitRevolution here!

The Nonprofit Revolution

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Wethos

Written by

Wethos

Responsive teams of creative and marketing specialists, actively accelerating progress for the world’s most meaningful brands https://wethos.co/

The Nonprofit Revolution

Nonprofits are badass, and so are the people working at them. We're gathering stories covering real and authentic perspectives in the nonprofit sector. Join the revolution at Wethos.co

Wethos

Written by

Wethos

Responsive teams of creative and marketing specialists, actively accelerating progress for the world’s most meaningful brands https://wethos.co/

The Nonprofit Revolution

Nonprofits are badass, and so are the people working at them. We're gathering stories covering real and authentic perspectives in the nonprofit sector. Join the revolution at Wethos.co

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