We’re living in the golden age of self-employment. Says Robert Kiyosaki of “Rich Dad Poor Dad” fame, all a person needs in the 2020s to start up a lucrative small business is a laptop computer and an internet connection. That bit of wisdom might even be revised to, all you need is an internet connection and a smartphone. But self-employment isn’t easy. In fact, managing cash flow can be a difficult, if not an impossible task at times, so many people still prefer to be traditionally employed. After all, not having to worry about a regular paycheck will help you sleep better at night. But for those who prefer the freedom of self-employment, be it as a writer, blogger, influencer, Amazon merchandise seller, YouTube personality, crypto trader, or any one of the many emerging self-employment opportunities out there, there will always be the problem of managing cash flow. Even if you take advantage of a bank that caters to small businesses and open a separate line of credit that can keep you afloat during dry financial periods, you still need to keep the cash coming in.
According to Moneymagpie.com, cash flow can be difficult even during the best of economic times. But during difficult times, like those occurring during the recent Covid-19 Pandemic, freelancers and contract workers often find themselves not getting paid for their services. This is why it’s important for you as a self-employed professional to seek out creative ways to not only manage existing cash flow and to seize upon the cash you are owed but to take advantage of the money you didn’t even realize you might be entitled to.
Manage Cash Flow by Selling Your Invoices
Over 50% of all freelance invoices are either paid late on an annual basis or not paid at all. That’s why your clients must see you not as an individual but as a business. Says Moneymagpie.com, if your relationship with your client is a good one and not adversarial, then place a call or an email asking politely for the reason behind the delay in payment. If your client is also having money problems, you can always offer them the option of paying in smaller increments, perhaps with a little interest tagged on. But if the client refuses to even answer your emails or phone calls, you have the option of selling your invoices. Special services will actually purchase your outstanding invoices for somewhere around a 10% fee, and in turn, they then chase after the full payment. Not a bad deal when you think about it, because like they say, getting something is a lot better than getting nothing at all.
Manage Cash Flow by Paying Your Taxes Early
If there’s one thing freelancers (especially freelance writers) dread, it’s tax time. Some self-employed people will go so far as to guesstimate their tax bill and pay it in advance. If you’re doing that, stop. You could very well be spending cash unnecessarily. Instead, try paying your taxes on a monthly or even weekly basis. Or, for each paid invoice you receive, hand over what’s owed to Uncle Sam right away. That way, instead of over-estimating what you think might you need to pay at the end of the tax year; you only pay what you need to pay. This method is said to free up extra cash, which you can then reinvest in your business or even invest in new money-making, digital opportunities like Bitcoin.
Manage Cash Flow by Deferring Your IRS Tax Payment
On the other side of the coin, if you find yourself short of cash, you can always defer your tax payment to the IRS. If you need to pay outstanding bills such as your phone, internet, and other necessary items for conducting business, you can apply for a tax deferment via an accountant. During times of pandemic, some tax deferments can be conducted tax-free for a certain period of months. It should offer you some cash relief should you need to pay suppliers, rent, and other major bills. But you must realize that deferring a tax payment doesn’t mean it won’t have to get paid at some point. The bill will need to be paid and the tax bill that’s accrued in the meantime. What this means is, defer only what you absolutely need to defer to stay in business.
Manage Cash Flow by Filing for a Rebate on Your Utilities
It’s not uncommon for freelancers, despite your occasional lack of sufficient cash flow, to overpay on your utilities, including gas and electric bills. You sometimes pay estimated bills, especially during the winter months, rather than exactly what you owe. While you may owe more than what’s been estimated, all too often, you are due a rebate. You should file for your rebate if your cash flow has slowed down. Naturally, if you’ve overpaid, apply for the credit due to you. That’s not the utility company’s money. It’s yours.
Manage Cash Flow by Re-budgeting
If you’re having trouble managing cash flow, maybe it’s time to take a good look at your budgets. Go through all your bills and especially look at all those payments that automatically come out of your account once per month. Maybe you’re only paying a relatively small amount for things like HBO, or Netflix, or Hulu, or even the gym membership. But taken all together, they can add up to a hefty sum at the end of the month. Do you really need cable TV when you can easily watch what you want on YouTube? Be creative in your budgeting, and also, don’t be afraid to sacrifice now for the later good. Remember, the most important part of the word freelance is free. Once you become a successful self-employed freelancer, no matter what you do to make a living, it’s tough to go back to being a traditional employee, even if it means you no longer have a cash flow problem.