Cash Flow for Freelance Editors

Cash flow. It's not a phrase you hear often with freelance editors. Yet it’s vital to staying afloat and avoiding the need to return to a staff job.

Here’s a a layman’s definition of cash flow:

There are two parts do this definition.

• Sufficient: You have enough to pay your bills

• Regular: You know when the cash is coming

A good cash flow lets you plan for the month and project income for future months. You know how much money you have coming in, and you know when it will land in your account.

If that doesn’t sound like stress relief, I don’t know what does 😅 

Let’s look at these two parts.

Earn sufficient cash

Most freelancers struggle with sufficient cash. If that’s you, look at how often you are booked and your rate. One or both of those needs to increase.

Start by assessing how often you're booked. Are there gaps in your schedule? Marketing your services more aggressively or expanding your network can help fill those empty slots.

Next, take a critical look at your rates. Are you charging what your services are worth? Underpricing undervalues your work and impacts your bottom line. Research industry standards and adjust your rates accordingly.

Combining more frequent bookings with appropriate pricing can significantly improve cash flowing into your account.

If you don’t have a system for staying booked, check out mine.

Make Your Cash Flow Regular

Yay! This month you earned enough cash. But then comes that month (or more) where you’re not booked and cash is insufficient. What then? How do we get out of that feast-or-famine cycle?

Your first option is to save up for the lean months. When you get extra work, put it in savings and then schedule transfers to your account. Boom, steady cash flow.

This is what most freelancers know they should do. But it can be hard, especially if you used a credit card to cover the months you were short. (Guilty on that one.)

The good news is there is another option that can help maintain a regular cash flow.

Look at your payment terms. Freelancers often charge hourly/daily, do the work, then send an invoice, and wait for payment.

If that’s your scenario, determine with your client before you start the project when you will send invoice dates. Make sure they go out on a regular basis. You could even look at automating payment, so the invoice doesn’t get lost in accounting while it waits for approval.

Make sure you also include payment dates in your contract. Some studios do Net 30, which means you get paid 30 days after your invoice. I don’t know about you, but that is nearly impossible to do as a freelancer.

And guess what—you don’t have to! You decide how your business (yes, you as a freelancer are a business) will process its payments. That might mean some clients wont work with you, but it’s better to have money when you need it than to wait for a month to get paid for the hard work you did.

Explore Payment Plans

If you charge flat rates, like I do, you have more levers to pull.

Typical payment plans are 50% at the start, 50% at delivery. This is a way to hold both you and the client accountable to pay and finish the project.

But there are other plans you can do. Instead of 50/50, you could ask to be paid 100% up front. If the client knows your work and trusts you to complete it, they may say yes. You can also incentivize it by offering a small (small!) discount). This takes self-discipline to not spend the money all at once, but now you control the cash flow.

You could also offer installment plans. If the price is $3000, they can pay $1000 for 3 months. The benefits are they don’t have to pay a large chunk up front, and you get steady income as the project pays out.

Want to learn how to use flat rates? Here’s how I do it.

The goal is to make the flow of cash into your account consistent.

Imagine knowing where money next month, or even two months from now, is coming from. How much stress would that relieve?

It’s taken me 5 years as a freelancer to understand cash flow. But as I’m learning about it, it is clear that is vital to the health of a freelancer’s finances.

There are ways to make the flow of cash into your bank account sufficient and regular. I’m excited to apply them to my business, and I hope you do too.

Keep cutting,

– Jesse Koepke

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