4 Simple Ways Freelancers Can Conquer Cash Flow Problems

In January 2014, a few unexpected life expenses hit me all at once: a huge medical bill, my son’s preschool fees, and car and health insurance that needed to be renewed. I should’ve been able to take care of these without any issues. I had just had a bumper month, billing more than $7,000 to my clients, but there was very little money in the bank for these sudden expenses.

As I sat there desperately calculating my finances, I realized that clients owed me over $9,000 for previous projects. My problem wasn’t income. It was cash flow.

My situation reminded me of a writer I once knew who, the week after getting a six-figure book advance, was evicted from her home because she hadn’t made provisions for paying the rent.

Cash flow, or the movement of money in and out of your business, is easily one of the biggest pain points for professional freelancers. From what I’ve seen, it’s often the reason most writers quit before they can find success. Between the inevitable delays of accounts department, the pay-on-publication policies of consumer magazines, and checks that, even today, get “lost in the mail,” most writers—even financially savvy ones—struggle to stay on top of their monthly income.

Here are some ways to manage it.

Track incoming payments

The very first thing I did to take control of my cash flow was to figure out my projected incomings for the next few months. A simple Excel sheet was all I needed. The trick, however, is not just listing your payments once you receive them, but setting up a system that takes into account the lag between submitting the work and finally getting a check:

1. On the top horizontal row, I made a list of months.

2. In the left-hand column, I made a list of all my clients.

3. Then, I looked over my assignments for the last few months and figured out when I was likely to be paid for them.

For instance, Client #1, a national newspaper, had assigned me a story in early January. I’d submitted it a week before I created the spreadsheet, and I was typically paid by this publication two weeks after invoicing. That meant that I was going to be paid in February. I entered in the amount of that payment in the February column in front of the publication’s name. I went through my entire list in this way and finally, after I was done, I was able to add up the projections for each coming month.

Here’s the basic template that I used for my spreadsheet:

If you create something similar, make sure that every time you get a new assignment you add it to the month when you’re expecting to get paid (not when the job is actually done). This will show you, at a glance, how much money you have coming in over the next month, quarter, and year. This will also help you make better work decisions. If you’ve just signed a book deal, then you know you’re going to be fine four months from now when that payment comes through—but next month might be looking a bit sparse.

It’s August now, so take a look at the August, September, and October columns in your spreadsheet. Is there enough coming in over the next three months to keep your bills paid, or do you need to start pitching and getting some quick hits? Keeping close track of your finances will help you answer these kind of important questions quickly and accurately.

Get paid faster

Over the years, I’ve learned that arguable the most important question to ask my editors at the very beginning is: When will I be paid?

Some publishers pay as soon as the work is submitted, but if you’re unsure, ask your editor before you start writing. This often leads to discussions about payment on publication versus payment on acceptance. If it’s on acceptance, it’s a good idea to get some clarity on what exactly “acceptance” really means; definitions can vary from client to client. And if it’s on publication, always ask when the piece is expected to be published—you’d be surprised how long completed pieces can sit on the back-burner.

My freelancing motto, honed by growing up in India and haggling on the streets of Delhi, is this: Negotiate like an Indian. There is nothing I like better than being paid quickly, so I make it a point to bring that up when I receive an assignment or contract. If you don’t ask, you won’t get it. But if you ask—and I do, frequently—you have a better chance of being paid faster.

You should also try to make life easier for publications by offering their accounts departments a number of different options for paying you. When I invoice through Freshbooks, my clients have the option to pay me via check, direct bank transfer, PayPal, or even credit card. The easier it is for them to make that payment, the quicker they’re going to strike it off their to-do list—and the more likely they’ll be willing to pay you quickly in the first place.

Diversify your client base

Since 2014 and that horrible January month I’ll never forget, I’ve become extremely wary of relying on a single source of income. Having been a freelancer for over a decade, I know diversifying your clients is a smart thing to do anyway, but with so many writing opportunities on the Internet, it seems almost silly to not take advantage of all of the options available.

I’m a journalist at heart, so I know that as far as my own career is concerned, there’s always going to be a longform piece in the making. It will take months out of my life, and will pay less than minimum wage after adding up all the hours I put in, but it will give me huge swells of pride and satisfaction. To balance that out, there will also be content marketing work that I do for brands, nonfiction books that I will self-publish, and blog entries for a website for writers that I run. There will be e-books, e-courses, novels, longform, shortform, and more.

Because I am an Indian living in London who writes for American publications, I take diversification to a whole new level. Not only do I recommend diversification in the types of writing and the types of clients, but I also highly recommend diversification in terms of regions as well. I have written for magazines and corporate clients in over two dozen countries. When the economy of one part of the world goes south, there are clients overseas that still need my services.

When you have a variety of clients in different industries, styles, and regions, it locks in a certain amount of income no matter how quickly you need it. A few digital clients can bring in small but quick paychecks when next month’s income is looking sparse, while traditional publishers may be able to offer you bigger sums that helps you put down rent. With the right strategy, your cash flow won’t disappear when clients do.

Pay yourself first

I pay myself a small salary every month. Since I have an unpredictable income, I make sure it is big enough that all my essential bills can come out of it each month, yet small enough that I can build a cushion for at least six months in my business account for when cash flow is tight.

Here’s the thing: I’ve had good enough income during a month for an impromptu trip to Paris, but I’ve also had low enough income that I could barely make rent. At the end of the year, I find that I’ve almost always done pretty well—but in the day-to-day, without a cushion, things can fall apart quickly.

So if you want financial security and peace of mind, pay yourself a salary to take care of your bills. You can save for that Paris trip, buy a new computer, or go on a writing retreat from the rest.

If you find that you still have some left over, you can rest assured knowing that your cash is doing what it’s supposed to: flowing.