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Thursday, February 3, 2011

A Simple Way to Manage your Cash Flow

Even with more than 14 years of fulltime freelancing under my belt, there's an ongoing issue I (and most freelancers) struggle with. It's what I call the "feast-or-famine" syndrome. In other words, you’re either swamped with work to the point that you’re chained to the PC to make your deadlines—or you have so little to do you’re overcome with simultaneous boredom, malaise, and hand-wringing anxiety.

Which is worse? The slow times, for sure. Every freelancer I know would rather be insanely busy than bored and broke. Wouldn't you?

But when you're busy, it's all too easy to forget about marketing--until you turn in a bunch of assignments and discover you're almost out of work. That's why I try to ensure a steady stream of work is by mentally dividing assignments into three categories—category A, work that’s been completed, turned in, and accepted (and that I'm awaiting payment on); category B, work that’s been turned in but is awaiting approval by the editor or client; and category C, work that’s “on my desk” that's been assigned but still has to be researched and written.

Maintaining a certain amount in each category—say $5,000—helps smooth out my cash flow. If I only have a couple of thousand dollars’ worth of work “on my desk”, however, I know I need to get cracking to line up more assignments. Otherwise, in another month or two, I’m going to be facing a dip in my income.

Try dividing your work into these three categories, and set a minimum dollar amount for each. That way, when your "on-the-desk" work falls below a that, you know it’s time to beat the marketing drum. It's an easy way to stay busy, and hopefully productive as well.

Readers, what do you think? How do you manage your cash flow?

4 comments:

  1. I have those three categories too, but I use it just to keep track of payments due and how much I'm earning. Never thought of assigning a minimum amount to them, though, but it makes perfect sense now. Thanks for the tip, Kelly!

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  2. Thanks for your comment, Chryselle! :)

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  3. Do you only do this division mentally? Or do you divide on paper or on a computer program as well? I feel as if doing this mentally would get way too confusing.

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  4. Hi, Allison--

    I just track it on paper; I don't find it necessary to use a computer program for it. I just add up what's in each category by hand.

    Hope this helps! :)

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