One of the greatest ways to have peace of mind is to have cash on hand

money + taxes Nov 12, 2020

One of the biggest challenges that freelancers face is a fear of inconsistent cash flow. Let's change that.

When you’re used to getting a steady paycheck every 2 weeks, this can be a big change for you.

Managing cash flow is something that Beth is passionate about teaching us, and she’s currently working on adapting her famed Cash Flow Projection Tool for you all - coming very soon!

In addition to being able to predict your cash flow, another strategy in helping to keep your sanity when it comes to managing your business finances is being intentional about creating and maintaining a cash reserve.

A cash reserve helps you in many ways:

You can dip into it if you’re having a slow season or month.
It can provide peace of mind that you can cover expenses while waiting for a set of invoices to get paid.
It lowers your anxiety when an invoice isn’t getting paid because you’re not depending on that money to pay your bills - you know you can always borrow from yourself if you need to.
You can use this to pay yourself during a sick period or if you want to take a vacation.
You can use it to pay your subcontractors while you’re waiting to get paid by the client.

In this episode, Beth talks to us about her perspective on creating and maintaining a cash reserve, how much should be in there, and easy steps you can take today to get started!

Here's what you'll find in this episode...

[1:15] Get excited! Beth is working on bringing you her infamous Cash Projection Tool!
[3:15] No biggie, but you can now watch Beth and Tiffany do the podcast on YouTube 😉
[5:00] What does 'cash reserve' even mean? Beth tells us it is just what it sounds like: it is money set aside, just in case
[7:03] The right amount of cash set aside depends on how long it would take you to pivot or recover if ALL the wheels fell off. What are your business costs for 1, 3, or 6 months? Don't forget to include paying yourself and/or employees, too
[13:40] Okay, so now you have your reserve set up, now it's time to keep track of it
[14:27] Beth recommends keeping a cash projection, so you can always know what your reserve should be (more on this in an upcoming course!)
[18:58] Feeling overwhelmed? Remember, you don't have to do this everyday, you just have to manage cash consistently, and Beth and Tiff can help!
[20:41] Okay, let's get some context. What's the best case scenario for needing cash? The best way is funding your emergencies with your own reserves, which you pay back like an internal line of credit
[21:41] The next best thing to do is get a line of credit, which you pay back when you can (best not to max these guys out!)
[23:43] Okay, but not great: getting a loan
[26:13] Know when it's time to get professional help (business or otherwise, we don't judge)
[28:15] Be VERY careful about investors, and remember to check into any investor thoroughly
[30:05] Never, ever, ever EVER ever do invoice factoring, which is when small businesses can get an advance to pay outstanding invoices, but you lose a percentage of every invoice you bill (moral of the story, collect your receivables)
[34:35] Financial independence is the freelancer's dream, but be mindful of FDIC limits, and check with your bank on how your money is insured
[37:08] Even if you haven't quite made the leap to freelancing, you can start a cash reserve now and start working towards that goal of independence
[40:44] Excel is your friend! If you don't know how to use it, learn it so you can manage cash, analyze situations, or creating something for a client
[42:32] We have a little announcement: Tiffany and Beth now offer coaching!
[46:02] We also have a BIG announcement to make: we are currently in production on our very first course, called You Can Do This, which is the perfect jump-off point for your business or foray into freelancing