When you are a self-employed professional, you may get to enjoy the benefits of higher take home pay for a job than employees do. However, you also have the added burden of keeping your cash flow in check on your own.

You are likely to have multiple streams of income and you have to chase all of these individually. Clients may not always pay on time. You will also have to plan your outgoings around these streams of income and when they come in.

There are a lot of risks associated with being self-employed, particularly when it comes to cash flow, so it is important that you take steps to try to keep yourself on top of this.

Payment terms

You aren’t guaranteed to get your payments through on time. In fact, the issue of late payment is one that troubles a number of small businesses and contractors a lot. Therefore, while it is not something that is totally preventable, you can take steps to reduce the instances when it will happen.

For example, when you are agreeing a contract, set out payment terms of 30 days. Perhaps even ask for 15 at first to leave room to haggle. Either way, try not to go any longer than 30 days.

However, while most clients are trustworthy, there are a few who might miss the payment deadline. Among the excuses you might hear is that they had lost the invoices, you’d missed the payment run and have to wait for the next one or that the person in charge of accounts isn’t in on the day your payment is due.

Sending your clients an email one week before your payment is due is one way of helping to ensure they don’t forget about it.

Be strict about payment deadlines. If your client is holding back on payment then stop work until you get your money.

You could also agree to get half a payment before you start a job and half after so that you have some money to keep you going. Alternatively, you may be able to get a client to agree to pay in full before you start work but this generally works better if you have an established business relationship with them.

Arrange outgoings around payments

Try to ensure that your outgoings correlate with what money you have at the time. If there are expenses you can do without while you are waiting for a payment then do so. Do not spend money under the assumption that you will get the cash from a client in time. As stated earlier, payments do not always come in on time so you could potentially end up in debt if you work assuming that they do.

Keeping a cash reserve in your bank account can be useful as this gives you a cushion in the event that you do not receive payments for a long time. It’s worth keeping approximately enough to cover you for three months if possible so that you can rely on this if you find yourself not getting paid for a while. That isn’t just in case your payments are late but also in the event that you are unable to get work for some time.