Managing the Ups and Downs of Your Freelance Finance


Categories: Accounting, Business

Managing the ups and downs of your freelance finance

Managing the ups and downs of your freelance finance can be challenging since most of us don’t receive regularly scheduled payments from our customers. Typically, we start a project with a deposit and do not get paid until the project is completed. This in itself is a challenge for some since projects can go on hold or linger which puts a lot of time between the deposit and payment for remaining balances. This creates a lull in our payment cycle and can cause us to come up short some months depending on how many hours you have out in a project. There are a few things that we can do systematically that can help reduce these highs and lows to level off our payment cycles. Some are easier than others and do take practice to develop good practices.

Project deposits

Project deposits help kickstart our money flow and help get projects off on the right foot. Starting a project off with a 30-50% deposit can quickly put us back on track when we’re experiencing an unusually slow month. The bigger our projects are the bigger our deposits are. I outline the payment requirements in my proposals using Bidsketch, then invoice as soon as I have sign off with Blinksale. For me, a 50% deposit has proven to work well for both myself and my customers. This creates an income boost for me and allows my customers to become invested in the projects. Once the project is complete I’ll bill the remaining balance.

Getting paid

At times customers will take their time submitting payment which can cause money flow problems as well. I typically give my clients 15-30 days to pay invoices depending on whether it’s an initial down payment or a final down payment. If the customer is in a hurry, I’ll ask for payment due upon receipt to speed projects up. When a customer is late on a payment I follow up immediately. I don’t wait a few days with hopes that they pay. I follow up the day after their late to show them that I’m paying attention. Giving them those extra days after the invoice is due says that you may not be paying attention or may not be following your own policies. Following up on invoices promptly reduces the amount of days you’re going to wait to get paid.

Retainer agreements

All of us remember the days when we had regular full time jobs and our checks came every pay cycle no matter what. Retainer agreements are about as close as we can come to this as a freelancer. Retainer agreements are harder to find but are an excellent way to balance our monthly cash flow. They’re typically for a set amount of hours and pay each month, which provides us with a set amount we can depend on. If you don’t currently have a retainer agreement, look at your current customer list to see if any of them are good candidates. Typically a good candidate would be a customer your working a good amount of hours for each month rather than one-off projects. This offers a more predictable amount your customers can budget for and helps smooth out your monthly income.


Nothing is more valuable than planning your finances ahead of time. This requires knowing, down to the penny, your monthly expenses so you know where you stand. If you’ve had an usually busy month, you may find yourself in good shape financially for months to come due to having the extra hours to bill. On the other hand, you may come up short with an unusually slow month which means you should probably start following up with past clients to drum up opportunities for work or you may want to shift your efforts over to marketing to get the work coming in a again. Looking ahead 2-3 months at a time will tell you where you need to spend your efforts. A good tip for marketing though, don’t wait until the last minute. Have a regular marketing plan in place that allows you to stay in touch with past clients and prospects.


Of all of my tips, I’d say this is probably the most challenging for some. A good method is to have a set amount of savings you’re comfortable with and shoot for that goal. Is it $5,000, $10,000, or maybe more? Whatever the amount, work toward banking that amount over time. Having saved this amount will give you peace of mind that you can cover a gap of slow time, which WILL come eventually if you’re a serious freelancer. You may hover above or below you goal, but try to bank it and leave it. Create a separate account if it helps you separate it from accounts you spend from.

Managing cash flow is always a big topic for freelancers. It’s a challenge for all of us, but an issue worth conquering for the opportunity to be a freelancer. This is how any business runs and we shouldn’t treat our freelance businesses any differently. Money comes in and goes out and some months are leaner than others. This is the nature of our work and we must embrace the change to be successfully long term.

This topic was taken for our free 101 Simple Freelancing Tips download. If you haven’t already downloaded it, get our copy today.

Written by Brett Atkin

I have been building and maintaining web sites since 1997. I remember when Netscape was the top browser and PointCast was the news service of choice. The web and I have come a long way in the last 13 years. In those 13 years, I’ve built everything from brochureware sites, custom CMS’s using both ASP and PHP to fully responsive Wordpress sites. I’ve helped clients with their blogging, email marketing, online promotions, SEO and Analytics.

2 Responses to “Managing the Ups and Downs of Your Freelance Finance”

  1. Jon Cooper -

    Great advice, DG.
    I think another trend I’ve seen is that designers young enough to have a pretty good digital/web and print design skill-set are trying to create alternate streams of recurring revenue to complement their freelance business. For some this means creating an online SaaS or App. – writing books etc..With the economy being so sluggish, it seems like you almost need an alternate revenue stream or a cushy retainer as you mention.

    • Jon, I agree. There are a lot of different ways freelancers are creating multiple streams of income these days. Some easier than others and some more profitable. Nathan Barry is a good example of this. He’s an excellent designer and developer and has a good sense for how to sell products. He talks a lot about designing products and building audiences to sell those products. Really inspiring.