How to Stay on Top of Bills When You Have Cash Flow Issues: A Freelancer’s Guide

In chatting with fellow freelancers, from handymen to animators to graphic designers and SEO consultants, I learned that the majority of them return to the 9 to 5 because of cash flow issues.

It makes a lot of sense, doesn’t it? The constant stress of making sure you have enough to cover your living expenses each month will certainly test your mettle. When you’re having a lean month as a solopreneur, you might need to tap into your emergency fund, which can be demoralizing. Or you resort to racking up debt, and might need to pay for your past for years to come.

It’s been said that people don’t freelance for the money, but they stop freelancing because of the money. Ideally, you’d have at least six months of living expenses tucked away. But that might not be realistic for everyone, at least in the short term. So how can solopreneurs stay on top of their bills despite hiccups in cash flow? Here are some tactics:

Ask for Shorter Payment Cycles

While most clients will pay within 30 days of receiving an invoice, see if some might be able to pay you within a shorter period of time. Some clients are able to send payment every week, or even within a few days after you send a request for payment.

It certainly never hurts to ask. Whereas some accounting departments are set in their processes, others might have more flexibility. If you express that it could really help you out financially, they might be able to speed things up on their end.

Keep Track of When Payments Hit Your Bank Account

It’s not only important to know how much you’re getting paid, but when you’re getting paid. You might get paid through different methods: PayPal, check, or direct deposit. If you’re receiving payment through, say, PayPal or a check, it typically takes an additional few more days before that money is transferred to your bank account.

While most of my clients pay me via PayPal or direct deposit into my bank account, there are a few “wild card” payments that come in the mail in the form of a check. I use accounting software to keep track of when all these different forms of payment hit my bank account.

Pro tip: If you’re nervous that you might miss a check when it’s en route to your home, you can sign up for Informed Delivery with USPS, which is free of charge. You’ll receive notifications via text or email of upcoming mail, and can see thumbnail images of letter-sized deliverables.

Sync Up Bills With Client Payments

This really depends on how your freelance income pie is divided, so to speak. If you have a retainer client from which you’re guaranteed a larger chunk of money on the regular, consider allocating that payment toward a larger bill, such as your rent or car payment. And if you have smaller payments from clients that are reliable (i.e., they pay you every Friday, or on the 15th and 30th of the month), consider designating those more consistent chunks toward some of your other bills.

If your bills don’t sync up perfectly with your income flow, call the company, explain your situation, and see if they’re willing to change the payment due date. That way you won’t be late on a bill, and the company gets their money from you. It’s a win-win situation.

Divvy Up Your Bills Based on Your Personal Cycle

Allow me to get super nerdy: you might want to put in some work to see what your own cycle with income flow is. For instance, maybe you get a large payment from the same client on the 15th, another large payment from another client on the 20th, then smaller payments of varying amounts throughout the month.

In that case, consider divvying up the funds from these two larger payments for your rent and as many bills as possible. It can be tedious, but it’s a lot better than missing your bills or not having enough to squeak by each month.

Get One Month Ahead

If you can get one month ahead, you can for the most part automate your bill payments. In other words, by the end of a given month, you have enough in your bank account to cover the following month’s living expenses. This is something you can do whether you have a 9 to 5 or you freelance.

It’s something I started back when I had a day job, and it’s really helped me avoid stressing out about covering my bills. Plus, I don’t have to constantly check bill payment dates and dog simple math to ensure there’s enough in my bank account to cover rent. If you have a flush month income-wise, save up those beans so you’ll have enough to cover your living expenses for the upcoming month.

Keep a One-Month Buffer Fund

It can feel like you’re taking a step back when you need to tap into your reserves to cover bills. You might ask yourself: What’s the point? Aim to keep a one-month reserve in your savings account for lean months. That way you’ll only touch your emergency fund for true emergency events. Think of your buffer fund as a box with a lid that you can easily open and close. An emergency fund, on the other hand, is safely guarded, and you’ll need a key to open.

Until you hit financial freedom or get to a place where you have enough reserves so that you won’t have to stress out, try these small moves to help you better manage gaps in cash flow.

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Jackie Lam (50 Posts)

Jackie Lam is a personal finance writer. Her work has appeared in Investopedia, Magnify Money and The Bold Italic, and she’s been featured in Money, Kiplinger, Forbes and Woman’s Day. She runs heyfreelancer.com, a blog to help freelancers and artists with their money, and to balance their passion projects and careers.

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