Do you want to learn how to manage your cash flow as a freelancer? The status of being self-employed, while attractive for its freedom, often leads to fluctuations in income, especially during the first year of activity. That’s why, at Weepo, concerned about helping freelancers manage their budget, we provide you with key advice to anticipate your cash flow as a freelancer. From the right rate to set as a freelancer to the option of wage portage and the budget forecast, follow and manage your professional finances with ease.
The proper management of your cash flow as a freelancer starts with the definition of your rate. Indeed, with a rate that is too low, it will be difficult for you to cover all your operating costs. This negatively impacts the cash flow of your business and its profitability. Before that, it is important to prepare well to become a freelancer: choose an appropriate legal status, identify your key skills, and define a clear offer. To set the right rate, you need to consider the following parameters:
To set your rates correctly, it is essential to understand the difference between your revenue and your net profit.
Let’s illustrate this statement with a concrete example:
You are a freelance IT consultant and you charge €4,000 for your service.
The costs are distributed as follows:
Revenue: €4,000
Social charges: 24.6% (for BNC service provisions), 4,000 x 24.6% = €984
Flat-rate deduction for professional expenses: 34%, 4,000 - 34% = €2,640
Tax rate after deduction: approximately 10% (if you are in the 0 to 11% bracket), 2,640 x 10% = €264
Available income: 4,000 - 984 - 264 = €2,752.
⇒ Thus, nearly 40% of the revenue goes to charges and operating expenses.
To help you set your rates correctly, use a freelance income simulator to anticipate the impact of your charges and plan your cash flow. If you are in wage portage, we recommend the Weepo income simulator: https://weepo.fr/en/simulator-portage-salarial.
To manage your cash flow well, it is imperative to anticipate all your expenses and build a financial reserve to survive in case of a lull in projects. To do this, save regularly a small percentage of each income to create a safety net. Use the 50/30/20 rule, which consists of allocating 50% of your income to needs, 30% to leisure, and 20% to your savings.
Let’s illustrate this tip with a concrete example:
You are a freelance writer and you earn €3,000 in revenue each month. By saving 20% of €3,000 each month, you build a monthly savings of €600.
⇒ After a year, you will have a financial reserve of €7,200, a sufficient amount to cover up to six months of inactivity.
For a clearer view of your cash flow, plan to open a dedicated bank account specifically for your freelance activity. This way, you clearly separate your business expenses from your personal expenses and better manage the financial flows related to your activity. The dedicated account allows you to visualize the state of your cash flow at a glance and track the evolution of your growth. For an even clearer view, consider creating sub-accounts to separate your expense categories: this tip allows you to know precisely how much you have paid in taxes, VAT, and operating charges… The bonus tip is to synchronize all your accounts via a bank account aggregator. This way, you get a global and centralized view of your financial situation.
💡Good to know: opening a dedicated account for your activity is mandatory once your annual revenue excluding tax exceeds €10,000 for two consecutive years.
Managing your cash flow starts with precise and rigorous accounting management. If you are a freelancer in a micro-enterprise, you are not subject to complete accounting. However, good maintenance of your income book and purchase register allows you to precisely track each income and expense. You thus have a clear view of the remaining balance in your cash flow. For maintaining these records, you can use an Excel spreadsheet or an online accounting tool to centralize all your management.
In addition to your accounting records, consider establishing a budget forecast to estimate your cash flow for the months and years to come. To do this, anticipate your potential drops in activity, your recurring charges (subscriptions, insurance, taxes…) as well as your variable charges.
Being vigilant in managing your invoicing allows you to better preserve your cash flow in the long term. When you land a contract or a project, remember to have your client sign a quote. The signed quote serves as a contract and binds both parties. Thus, your client is obliged to pay you and you better protect yourself against unpaid invoices. Thanks to the quote, you know in advance what amount of revenue you will collect over the given period and consequently, you will have a better overview of your cash flow.
In addition to the quote, ensure clever management of your invoices. To do this, follow these basic invoicing rules:
💡Good to know: some online invoicing tools alert you when payment deadlines are approaching. This way, you avoid any reminder oversights.
For a healthy cash flow as a freelancer, favor regular collaborations over occasional ones. By securing large contracts, you ensure stable and recurring income in the long term. Regular collaborations often lead to the signing of a contract specifying the exact duration of the service. Thus, you have more visibility on upcoming payments, you anticipate your drops or lulls in activity, and you can forecast your cash flow in advance.
Be aware that the choice of your legal status greatly influences the growth of your business and consequently, its cash flow. Depending on the nature or evolution of your activity, you need to ensure you choose the appropriate legal status to optimize your cash flow.
Let’s illustrate this point with a concrete example:
Suppose you are engaged in a production activity that requires investing in expensive machines and equipment.
⇒ In this case, the micro-enterprise status will not be suitable, as you cannot deduct all your charges from your taxable income, which can weigh heavily on your cash flow.
In such situations, it is ideal to turn to other legal statuses such as EURL, for example. To make the most relevant choice, it is best to be accompanied by an accountant.
To be more at ease in managing your freelance cash flow, consider the alternative of wage portage. This status combines the freedom of self-employment with the security of salaried work. It particularly appeals to mobile profiles, such as digital nomads, who wish to work from abroad without sacrificing their financial stability. By opting for wage portage, you delegate all your administrative formalities to your umbrella company and focus on your mission. You gain numerous cash flow advantages, namely:
💡Good to know: by choosing an umbrella company like Weepo, you benefit from total transparency regarding your cash flow thanks to our “zero hidden fees” guarantee.
You now know the 8 tips for managing your cash flow as a freelancer. Here they are again:
To go further, check out our guide to learn how to set your average daily rate (TJM) as a freelancer: https://weepo.fr/en/blog/tout-savoir-sur-le-taux-journalier-moyen-tjm and discover why wage portage can be a secure solution for freelancers: https://weepo.fr/en/blog/portage-salarial-une-solution-securisante-pour-les-freelances.
Responsable Marketing & Communication chez Weepo, je suis passionnée par l'animation du réseau et l'accompagnement de nos consultants. J'organise des événements parisiens et accompagne nos équipes régionales pour créer des moments d'échange enrichissants dans l'écosystème du portage salarial.
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