Cash-flow is the beating heart of every for-profit (and also not-for-profit) enterprise and it is imperative that business owners keep a finger on the pulse of revenues that flow in and expenses that flow out of the coffers and constantly monitor the venture’s fiscal health. Your ability to pay recurring bills, invest in the business and maintain operations depend on it.

There are several Key Performance Indicator metrics that reveal the strength (or weakness) of aspects of the business—the number of active clients, the number of subscribers to your blog and/or newsletter, the conversion rate of sales leads and the percentage of clients who give you repeat business, for example, and each tells an important story. But in the end it’s about the money, how much comes into the business (accounts receivable and whatever additional income) and how much goes out (accounts payable, plus interest payments and taxes).

Follow your cash-flow

If you send only a few invoices each month and generate them yourself, why not create an Excel spreadsheet and enter your receivables and payables data there, at no charge? You can monitor invoices (accounts receivable) and update as payments are received. Each month, you can easily calculate revenue. Monthly bank and credit card statements, PayPal emails and updates from online payments, made or received, will verify your accounts payable activity and confirm receiveables that are paid.

You can record it all in Excel (and label it your Profit & Lost Statement) and understand whether you’re making money, breaking even, or losing money when you view the bottom line. With that knowledge, you can create strategies to capitalize on your financial situation or correct it.

If you’d rather pay for an invoicing and accounting service, there are several good options available, including Fresh Books, HoneyBook, Invoice2Go, Oracle’s NetSuite, QuickBooks, VCita, ZarMoney and Zoho Books. The platforms make it easier to send invoices, reconcile accounts, generate reports , track time spent on project work and more.

Evaluate expenses

Examine your company’s recurring monthly, quarterly, or annual expenses. Can you trim the cost of utilities, renegotiate commercial space rent or insurance payments? Why not terminate premium services or other subscriptions that don’t deliver as you anticipated? Ditto for organization memberships that you can’t find the time to utilize.

The work from home phenomenon should help you lower your rent for office or other commercial space. If your landlord balks at dropping the price, consider asking for more space, if you’ll find it helpful, or ask for perks such as a discounted maintenance fee.

If you have a history of paying bills on time, call your insurance, credit card and loan companies and ask for a lower interest or premium rate.

Demand a deposit

When a project fee reaches a mid 4-figure sum, request a 10% – 20% up-front payment at the contract signing. Link subsequent payments to the completion of project milestones. Aim to leave no more than 25% of the fee payable at project completion. In other words, help your monthly cash-flow and revenue by scheduling most payments before the client has what s/he wants. If the client is unethical and “forgets” to make the final payment, you’ll have most of the money in your pocket.

Invoice on time

The thing about being a Freelance consultant is that unless you are a big-league player, invoicing, proposal preparation and other administrative tasks are done on your time. Remember that when negotiating project fees and try to roll it in.

I find invoicing to be a chore, but that’s how I get paid. Within two weeks of the completion of whatever client work you’ve done, train yourself to invoice. On your invoice, state that payment is due upon its receipt.

No-problem payments

If you sell products or provide services at your clients’ homes or offices, enable on-the-spot invoice payments with mobile apps that use your smartphone or tablet to accept credit or debit cards. Investigate mobile payment platforms such as Helcim, Payment Depot, Square, Stax and Stripe.

Credit cushion

A business line of credit is a good insurance policy against cash-flow droughts. Talk to the manager at your bank and s/he will be happy to discuss options with you. Most likely, you’ll receive a business credit card, which will be very helpful as you track business expenses, whether you take a prospect out to breakfast, attend a professional development or networking event, or buy a new computer.

As well, if your credit score is good you may be able to more quickly collect receivables from good clients who are, unfortunately, slow payers, by applying for a NOWaccount. Both your company and the client’s company must be approved. You invoice the client as usual and NOWaccount pays you within 30 days, minus a fee. Client checks are made out to you, but mailed to a post office box belonging to NOWaccount. If you have a good client who is a 60 + day payer, you can be well-served with this option.

Thanks for reading,

Kim

Image: Leonardo DiCaprio in Catch Me if You Can (2002) directed by Stephen Spielberg