Category Archives for Cash Flow

Three tips for improving your business cash flow

Cash flow might sound like a scary accounting term, but it’s just the money coming in and going out of your business. If that money doesn’t keep flowing in, the outgoings keep us awake at night. Indeed, cash flow problems are the reason why most small businesses fail. This doesn’t need to happen to you, though.

In this post, I’ll share three tips for keeping the money flowing into your business.

1) Get Your Timing Right

Often, we tend to invoice in clumps. Rather than billing a client when the project finishes, we wait till the end of the month. Although this can be more efficient, it means the money comes in much later. Invoicing more frequently, e.g. weekly, or invoicing after every job gives you a steadier income stream.

I run a lot of workshops for a major client. Sometimes this involves 5-6 events per month, and I invoice after each event. This is extra admin for me (and them), but it reduces the risk of late payment. As a very large company, sometimes their finance system has a spasm and it takes several months for me to get paid. If it’s a few hundred pounds, I can cope; if it’s a few thousand, it’s very disruptive.

2) Implement a Late-Payment Policy

There are often good reasons for late payment, but in other cases your client is struggling with their own cash flow problems. As a small business, you can charge a fee and interest if payment isn’t made by your deadline. You might feel uncomfortable with implementing this policy. However, often it’s enough to simply state the policy on your invoice and be prepared to politely remind the client of its existence.

I’ve heard much evidence to suggest debtors prioritise invoices that include a late-payment policy.  You probably don’t need to send in the heavies.

Take a look at my blog post on How to Get Paid as a Freelancer or Small Business for suggested wording and details of the penalties you’re allowed to apply.

3) Part-invoice in advance or at milestones

Cash flow is particularly tricky with big projects. They can last months, then it’s at least another month before you see any money. If there are obvious milestones – points at which you deliver part of the agreed outcomes – you could invoice for the work completed so far. This also makes it easier to maintain momentum.

Perhaps you’ve spent a lot of money on materials for the project? It’s worth negotiating some upfront money from your client.

Advance or milestone payments improve your cash flow and also mitigate the risk of non-payment. If your client gets into financial trouble, at least you have some of the money. Negotiating these terms might feel awkward, but it’s a lot less awkward than chasing an unpaid invoice.


In summary, here’s how to keep the cash flowing in:

  • Create a continuous income stream by invoicing weekly or even daily
  • Devise a late-payment policy and implement it
  • Break down larger projects into smaller chunks and invoice throughout

As with anything, getting into a routine can help. Setting aside just 25 minutes a week could ensure the cash is flowing and that you’re not experiencing a blockage. Creating a cash flow system reduces stress and allows you to concentrate on what you do best.

Deciding What to Charge Clients – Part 3

Many freelancers fantasise about earning a six-figure income. We sense it’s possible, but the financial responsibility that comes with running a business often means we pay ourselves last, once all the expenses have been covered. Usually, the only way to earn significantly more is to charge a lot more.

In my last post, I talked you through how to decide what you want to earn from your business. Hopefully, you now have your Happy Rate. How did that feel? Is the Happy Rate a long way from what you’re currently charging clients? Do you need to increase your fees? If so, you should start communicating your value. Here’s how.

What will you pay for?

First, I’d like you to think about the last expensive professional you paid. Make sure it’s a situation in which you were obliged to part with an uncomfortably large sum of money, more than you would normally spend. What made you decide to spend this sum? What convinced you this was a worthwhile expenditure?

When I facilitated this exercise at a workshop recently, some of the examples cited included a hairdresser, a structural engineer, and a physical therapist. In the case of the hairdresser, the attendee had very precise requirements and she wanted to feel sure they would be carried out. Her hair was very important to her, so it was worth paying someone who would do it properly. The structural engineer was by far the most expensive professional. He convinced this attendee to pay a lot of money because his website clearly showed he had extensive experience. This reassured her that the house wouldn’t collapse. Indeed, this was a situation where low prices would have created distrust. The physical therapist was chosen because his personal warmth and genuine caring nature convinced the attendee to entrust him with her ailments.

Although these example businesses might be very different from your own, hopefully it gives you an idea of how we make these decisions. And if you also consider your own recent decisions, you’ll start to see what makes us say yes, and, of course, what makes us hesitate.

What are you worth?

How did you set your current fees? Perhaps you just looked around to see what everyone else was charging. Or maybe you plucked a figure out of the air – one that seemed a good number, but wasn’t too cheeky. This is what we tend to do when we feel uncomfortable or lack confidence. Instead, I’d like you to think about your business and what you are offering. Ask yourself these questions:

  1. What do you do?
  2. Who do you do it for?
  3. Who else does the same?
  4. How are you different from them?
  5. Are you selling time or results/solutions?
  6. What difference are you making?

It’s unlikely you’re simply selling time. If you’re a therapist, a client doesn’t book a session because he wants to spend an hour with you. He wants you to solve his problem and to make a difference. This is what you are charging for.

Your experience and approach won’t be exactly the same as anyone else’s, so don’t use their charging model. And in this type of business, you are not competing. Your business isn’t directly comparable with anyone else’s. Instead of competing on price, communicate your value and the difference you are making. You never want to compete on price as it’s a race to the bottom.

So, decide on a fee that allows you to cover your costs, pay yourself a decent income, and one that conveys the difference you’re making.

Here are some tips on communicating value:

  • Deliver good work, consistently
  • Gather feedback and testimonials and make them visible
  • Present yourself appropriately – if you charge £500 per day, you want a proper website, not a Tumblr page

Getting the price right

As I said a moment ago, you don’t want to compete on price. However, you still need to be realistic – it’s about achieving a balance. Remember, you can’t serve everyone (unless you have a truly scalable business), so pricing can be an effective way of restricting demand. You never know how much money potential clients have, or what type of spending they are prepared to prioritise. Consequently, it’s important not to set your prices too low out of fear.

One effective technique is to offer different price points in the form of packages:

  • Basic – a cheap package that’s affordable to most people and easy to deliver. Once they’re through the door, they might upgrade to a more expensive option.
  • Medium – this package is a bit more expensive and has many more features. This is likely to be the most popular choice.
  • Premium – this includes absolutely everything. Not many people buy the premium package, but when they do it’s a big chunk of income for you.

If you want to learn more about pricing strategies, I heartily recommend Sweetspot Pricing by Julia Chanteray. This short book includes tonnes of valuable information for small business owners.

Nobody likes having the ‘money’ conversation with clients. It feels grubby and graspy. Here are a few hints on how to handle it:

  • Have the conversation as early as possible! Don’t leave the fees to your client’s imagination (or, worse, let them think you’re working for free).
  • Never haggle. Use the exercises in this series to be clear on what’s a fair price.
  • Talk about price at the beginning, then focus on your value.

It’s not your responsibility to be affordable – it’s up to them to decide whether the problem you’re solving is a priority.

For tips, tools, and resources on self-employment, please sign up for my monthly email.

Image: © pogonici –

Deciding what to charge clients – Part 2

Theoretically, running your own business should mean more money and increased flexibility. In reality, though, we can end up working more hours and earning less than we did as employees. Often this is because we don’t charge realistic fees.

In my last post, we established how much you need to earn to cover your costs. While achieving this figure is important, you want to also earn a decent living from your business. In this post, I help you establish an amount that supports your desired lifestyle and also gives you the flexibility to grow or adapt.

What’s your Happy Rate?

I have two levels for measuring the financial success of my business: OK and Happy.

OK –  earning enough to cover essential costs, pay myself a small salary, and make pension contributions. Unless I consistently achieve this figure, my business isn’t viable and I have to contemplate the horror of a proper job. For me, this figure is £2,052.27 per month.

Happy – this is where I want to be at least most of the time. My Happy rate allows me to:

  • Pay myself a dividend (to pay for fun stuff like books, gin, and holidays)
    Put aside money for tax in advance (rather than a mad scramble when it’s due)
  • Invest in training and development
  • Hire other freelancers to help me
  • Experiment with new projects

What would a Happy figure look like for you? Take your OK figures and add the amount you’d like to spend each month on non-essentials that are important to you.

My Happy Rate is £5,000 per month. Based on the calculations in my previous post, this means I need to earn £360 on my working days. As self-employed people, much of our time is spent on unpaid and unattractive tasks such as admin, marketing and bookkeeping, so only half my week is income-generating.

This calculation helps me set rates for my coaching and training. I can see a maximum of 4 coaching clients in the day (this allows time for preparation, reflection, and writing follow-up notes), so I charge £90 for a session. Most of my workshops are half-day events, which means my fee is between £325 and £425, depending on the location. I also need to factor in travel, preparation, and the amount of energy required. I’m unlikely to get much else done that day, so it must be priced accordingly.

When I first started my training business, those rates were about two-thirds cheaper. Consequently, I just about covered my costs, but I couldn’t grow or pay myself a meaningful income. In fact, pro-rata I was earning less than when I worked on the cigarette kiosk in Sainsbury’s 30 years ago.


How do you feel about your Happy Rate? Does this involve a big shift from what you’re currently charging?

Remember, you’re working hard, so your efforts should support you to:

  • Earn a good income
  • Save for retirement
  • Invest in personal and professional development
  • Get recognition for your skills and experience

Don’t be the worst boss you ever had! If you look after yourself, you’ll do better work; if you do better work, you’ll get better clients. Better clients pay more, which means you can invest in you and your business. It’s a virtuous circle.

In the final part of the series, we’ll consider how you can communicate value to your clients, especially if you need to increase your fees.

For tips, tools, and resources on self-employment, please sign up for my monthly newsletter.

Image © Talaj –