Recently, I wrote a confessional post about how un-savvy I was as a freelancer. The stats (that 50% of small businesses fail in their first 5 years) told me I wasn’t alone.
Yet, as I went to hit publish, I wondered whether people would mock my amateurishness. Since then, many people have reached out to say they found my post reassuring and inspiring.
So, it seems a lot of us are in the same boat. If you’re wondering how financially savvy you really are as a freelancer, here are some questions to ask yourself!
Of course, every client counts and it’s going to hurt any time you lose business. But it’s a reality you need to prepare for. After all, client budgets change all the time and you should always have a backup plan. If that backup plan is dipping into personal savings, or even selling your own stuff, that’s a red flag.
It’s good to have some tactics up your sleeve in order to find new business. But this should be something that you have consistently in motion, not a reactive step when you lose a new client.
Bravo! Ideally, all business owners have a stable roster of anchor clients who help them weather any storms of losing clients. These clients will help ensure your expenses are covered and cash flow is maintained, at the very least.
In an ideal world, business and personal finances are kept separate. So when tax time, or any other financial need arises, your personal savings are not your only option.
Good for you – you’ve been conscientiously setting money aside throughout the year. But now you’re white-knuckling it, hoping you’ve saved enough. Tax time shouldn’t feel like a lottery… if you’ve been tracking everything fastidiously throughout the year, there shouldn’t be any big surprises ahead of you.
Paying instalments on tax throughout the year is a great way to ensure a pain-free tax time. No skeletons in the closet or guessing games. You’ve tracked your income and expenses, you have your ducks in a row and now tax time is a breeze.
That shoebox may seem handy right now, but come tax time you’re going to have to manually enter all that information and categorize it. And while you’re keeping everything somewhere safe, you have little to no day-to-day visibility on where all your money is going. Our advice: Time to level up!
What a great work ethic you have! But what if we told you that 90% of spreadsheets contain errors? What’s more: There are much easier, less time-consuming ways to track your costs. While you get a gold star for effort, there’s a better way.
The ideal answer to this question is that you’re tracking expenses as-you-go on the cloud. Ideally, you’re using a solution (like FreshBooks) that also allows you to categorize your expenses into appropriate tax categories, and assign and rebill those expenses to your clients.
Okay, if you don’t really know what automation means, or think voicemail and auto-replies are the extent of it, you’ve got some catching up to do. Many tasks can be automated… think of those time-consuming and tedious tasks especially that don’t actually make you any money.
This is a great task to automate. You don’t have to remember a gazillion passwords, but you’re not setting them all to “password” either. Don’t stop exploring what more you could automate. Whether it’s marketing emails, recurring invoices or automatic expense imports – you could save a tonne of time!
You get the gold star for automation! Not only are these time-consuming tasks to stay on top of, they are also essential to keep that cash flowing… and we all know how important that is for a healthy business.
All business owners go through tough times, so cut yourself a break. One of the biggest reasons you might feel like you’re struggling is because you haven’t figured out how to manage all aspects of your business. Never fear: There are tools to give you control back and improve your odds of success. Invest in an accounting solution that’s easy to use and will help you manage your business to success.
This is a common challenge for small business owners. After all, their business is their “baby” and it can be difficult to find a healthy balance with everything. Our advice? A careful audit of where your time is being spent (use a time tracker to see what’s going on) will help pinpoint areas for improved productivity, or even outsourcing.
This may seem like an elusive goal… you may even think it will result in lost passion for your business. But it’s really the ideal state. For starters, you’re paying yourself first and treating your personal finances as separate from business finances. In addition to that, you’re putting yourself in a more objective place where your judgement is less likely to be clouded by personal passion. Congrats to you!
It takes effort to become – and remain – a financially savvy freelancer. As your business grows, you’ll hit new challenges and milestones.
But investing in tools that support your business growth, while providing you with an objective perspective on how your small business is performing, is a great step. Don’t take my word for it: Read the case studies of these thriving business owners and learn how the right accounting solution helped them succeed.