30-Day Persistence Challenge: Happy Tax Day

This qualifies as a persistence victory: Today, I paid my 2008 taxes on time and in full.

You may recall that I didn't expect to be able to pay the full bill today. Indeed, by my calculations, and with how screwy cashflow has been recently, I wondered if I'd be able to pay any of it at all.

The reasons I was able to remove the tax monkey that had been suctioned to my back for about a month had some to do with luck and some more to do with persistence.
The persistence part

Following up on invoices it not fun. When I started freelancing full-time a few years ago, I was convinced that checking on invoices was akin to begging for money. But as I've matured in my freelance life, I've come to see following up on invoices as just another part of the job. Here's how I do it:

Mark check due-dates on your calendar
Thirty, 45 or (god forbid) 60 days from the day you submit the invoice (or after scheduled publication, if that's your thing), note the due date on your calendar. Now ignore it and enjoy the rest of your day.

Send a friendly email
The day the check is due--or sometimes a few days later, I send an email checking in on the check's status. This does two things: It alleviates some of the anxiety inherent in the cash-flow cycle, and it lets your client know that you're keeping track. Squeaky wheel and all that.

What should the email say? Mine usually go something like this:

Hi there, nice AP person, I hope you're well. I'm checking in on the status of the check I am expecting from your company (invoice #X for $Y). My records indicate that it should have arrived yesterday, last week, etc. Can you let me know when I should expect to receive it? It will greatly help with my bookkeeping. Sincerely, Your friendly, professional neighborhood freelancer

I'm couching the query in professional, non-reactive language ("bookkeeping," "status of check," etc.). I'm not saying what I'm sometimes thinking ("For the love of god, please send me my money. Taxes are due!")

Follow up
Last month I discovered on a writers board that one of my favorite clients was paying later and later. So I asked a fellow freelancer for the contact information for the AP person and sent her an email asking something similar to the above. She confirmed she had my invoice, but said it "wasn't scheduled to be sent." Uh, really? Because it was due to be paid last week per your contract with me.

So I followed up asking, "What can I do to expedite the process? Is there anything I can do to help you?" Again--not confrontational. I'm simply looking for ways to make this work. After all, I have friends who are accountants and they hate paying people late. I know she'd pay me if she could.

Her answer was less than thrilling. She told me there was nothing I could do and I'd just have to wait.

So I sat on my hands--but not for long.

Call
Just like querying, getting your money takes follow up after follow up after follow up sometimes. It maybe shouldn't but reality is more important than ideals.

So in this case, I called the AP person a week and a half later and, a little panicked, I left a message. "I really need that check to pay my bills." Embarrassing? A little. But facts are facts and I was hoping it would help.

The result
I didn't get a call back, an apology or a check sent by Fed Ex. What I did get, a few days later, was an email from her saying she'd put the check in the mail--and not just a check for the outstanding invoice, but also a check for the invoice due in a few weeks.

The same goes for another check I received on Monday: I simply followed up and checked in to see when I should expect to be paid. The check wasn't due yet, but I wanted to know how they worked, since they were a relatively new client. Well, I got that check early, too.

And so, taxes got paid.

The luck part

I'm not saying all of this is due to my diligence. I am sure it helped. But just like I have no control over late payment, I certainly can't control early payment. Something about the loosening of the credit market and some internal wrangling at the companies that had nothing to do with me was also in play here.

The truth is, I don't care what caused it. I do care that going into the middle of the month I have both done my part and filled my wallet.

How do you follow up on invoices?

Photo by CarbonNYC.

30-Day Economic Stability Challenge: Ways to save

Janine Adams, who was kind enough to write some guest posts during last year's organizing challenge and whose blog is quickly becoming one of my favorites, had a great post last week emotional reasons people don't declutter. As someone who used to be allergic to saving money, I'd say they apply to saving, as well.

Here are the bugaboos Janine lists:

• I don’t know what I’m going to find in there. What if there’s bad news? Fear
• I don’t know where to start. Overwhelm
• Why do I have to be the one who has to do this. Why doesn’t my husband [partner, child, roommate] help me? Resentment
• I don’t want the process to dredge up old emotions. Avoidance
• I might need this thing some day. Fear of regret
• I spent good money on this item, I’d better keep it. Guilt
• What if the organizing system I set up doesn’t work? Perfectionism

OK so maybe not all apply, but I'd say most do. Fear, overwhelm, avoidance, guilt, fear of regret, perfectionism are all a part of saving problem in my experience. And I don't think I'm alone. Let's face it: we are not a country of savers. In 2005, American savings rates went into the red for the first time since the Great Depression. Cumulative American Consumer debt rose to $904 billion in 2007--an increase of 6 percent over just the year before, according to the Federal Reserve. The savings rate has gone up recently, but it's still at a measly 3.6 percent.

So how do we now buck that trend? How do we start saving?

Katrina offered one idea last week when she suggested we send a third of all our income into an untouchable savings account. But there are a few other ways I want to share, just to give you options and ways to start saving, even if you aren't doing it perfectly.

The 10 percent trick
In this method, you take the first 10 percent of every dollar that comes in and put it automatically into a savings account. You can do this by automating a withdrawal from your checking account to a high-interest online savings account, or you can transfer money every time a check comes in.

Add it to your spending plan
Recently I lamented to a self-employed friend that I have a hard time saving money. What she told me really stuck with me. She said, "I started out putting aside just $5 a month. I know it seems like nothing, but now I have $35,000 in savings." My spending plan includes a line for $20 in savings every month. It's not $5, and it's not 30 percent of my income, but it's something, and that's the whole point.

Do 50/40/10
For the past two years, one of the ways that's helped me save is to look at the money I earn above and beyond my monthly spending plan and divide it this way:

• 50 percent goes to savings;
• 40 percent goes to accruals;
• 10 percent goes to fun.

This has worked incredibly well for me because it really encourages me to earn more than I need to live on. Not only does money go into savings, but I also get to spend some of it right away--and that rewards me for increasing my income in a tangible way.

Designate a check for savings
I'm an impatient type. Saving $20 is the responsible thing to do, but when I've wanted something right away, it's worked better for me to just designate one incoming check toward an accrual category. Over that past year, that's allowed me to take three trips and pay for holiday presents. Of course, this assumes a decent income, but if you're making plenty of money without having much savings to speak of, this is a way to jump-start your new savings habit.

How do you fit savings into your spending plan?

Photo by nieve44/La Luz.

30-Day Economic Stability Challenge: Prioritizing Cashflow

You know the drill: You should have a good financial cushion in place before you start freelancing. But what if you don't, and you're already in business? Believe me, I've been there. Fellow freelancer Julie Sturgeon found an ingenious solution to her cashflow issues, so I asked her to share it. Generously, she agreed.

I especially like her method because it creates a "personal line of credit" without using a credit card or those home equity lines of credit The Simpsons lampooned on Sunday. I hope you, too, will find it inspiring. I challenge you to look at your spending and see if there are funds you can reallocate to create your own cashflow line of credit.

Sturgeon is a Greenwood-based writer with more than 20 years of professional writing experience. Her resumé covers everything from lifestyle reporter to investigative reporter, sports writer to editor of two business-to-business magazines. She is also a former winner of the Writer’s Digest magazine feature article contest. Besides writing, her passions are traveling, Indiana University basketball and the movie Braveheart.

Back in April of 2001 — before the 9/11 attacks, a dot.com bust, Hurricane Katrina, a stock market crash and recession— I interviewed an analyst about cash flow for a trade publication.

“A small-business owner has to stop worrying about profit and loss and start considering cash flow the lifeblood of the business," Alice Magos with Commerce Clearing House told me. "You can be terribly unprofitable and still survive as long as your cash is flowing — but by the time somebody learns that the hard way, they’re usually out of business."

It was a great quote in the article, but I wasn't a believer until my uncle confirmed it. My uncle, the small-business owner who has had his name on the outside of a funeral home for decades. Mu uncle, the man we considered the rich family member because he could actually spend money shooting at basketball hoops at a carnival until he won the big stuffed animal prizes. Yep, he confirmed, he rarely showed a profit on his taxes.

So I got it: The trick is to have money at your fingertips when you need it. But it wasn't something I focused on. After all, the cash was flowing automatically as I continued to earn more every year and incorporate my business. I set up charts to rate the profitability of each client. I cut the bottom 10 percent each year to improve those profitability numbers. I raised my minimum several times to maximize my time in the office.

And now it’s 2009, and suddenly whether or not any particular assignment earns my hourly minimum is moot. I need X dollars in my bank account each month to pay my set expenses. My accountant suggested we set up a small line of credit at the bank to draw from on those months when collections trailed behind the bill due dates.

My husband had an even better idea. He added up our mortgage payment, our monthly payment on the home equity line we took out to remodel the kitchen, and the amount we were paying back to our 401(k) plans we borrowed from when a business failed in 2007. If we remortgaged to roll all those into one payment, it would extend our timeframe to own the house free and clear from 8 years to 15, but the new interest rate meant that one payment came to only a few dollars more than the current mortgage. Essentially, the plan freed up nearly $1,700 a month in financial commitments in our household.
Starting this month, we are putting that money into a savings account as my personal line of credit. I’m not a big stickler on profit these days — in fact, I’ve lowered my hourly minimum expectations by $25 an hour — but I have the safety net I need to avoid being abused by slave wages, too. And should I need to draw on those emergency funds, I’m confident my husband will have a kinder interest rate than the bank.

30-Day Economic Stability Challenge: Three Ways to Increase Your Income This Month

In a pinch?

So often on freelance boards, writers pose the hopeful question: What do you do to bring in more money this month? We aren't talking about raising your income in the long run. Sometimes, you just need money now.

There are a few options, but proceed with caution: These suggestions are not a replacement for a business plan or a marketing plan. You will not last as a freelancer if you try to use these suggestions to keep your business afloat. They are stop-gap measures, and as such take you away from the focus you've created with your plan. As writer Merydith Willoughby replied when I posted this question on LinkedIn:

Writing has to be considered a business: You will have to make your mark in the particular genre you write in, be excellent in your field and work your butt off to make links, contacts, etc. Once you've achieved all that, yes you can achieve your goal. It takes time, hard work, years, stamina and patience and a willingness to always improve what you are doing. Other than that, yep - it's easy.

The other bad news is that there aren't many options that both pay well and pay quickly. Usually you get one or the other. What's that old saying? "I can do it quickly, I can do it well or I can do it cheaply. Choose two." The same usually goes for freelance writing, only instead of choosing between cheap and fast, you're choosing between well-paying and fast.

Having said that, here's what my LinkedIn colleagues had to say:

Option #1: Low-paying but regular clients

In Six Figure Freelancing, one of the things Kelly James-Enger impresses upon new freelancers is that it's important to just get a stream of money coming in. For her, it was writing for hospitals. For me, it was doing movie reviews and advertorial. Sure, they paid terribly and took up a bunch of my time, but I like movies, and they paid a week after I turned in the reviews.

This is what freelancer (and full disclosure: friend) Vanessa Richardson does. "[My way of making money quickly from writing] is writing a lot of blog entries for this AOL website that pays little but at least pays on time."

Finding these can be relatively simple. Low-paying work is available on Craigslist, MediaBistro and elsewhere. The key is to keep it a small part of your income stream and your time commitment so you don't fall into the trap I did: Spending so much time doing low-paying work you don't have time to query higher-paying markets. If you've managed this, I'd love to hear about it.

Option #2: Tutoring

If you're a decent editor and can get your hands on a Chicago Manual of Style or other style guide, you can post signs around local universities, advertising your editing skills for students needing help with their essays. You won't make $1/word rates, probably, but you will make a decent amount to fill the gaps.

Or, go more global with your teaching. Rob Duncan, keynote speaker and self-described "innovation catalyst" suggests you "teach others how to write through college night courses, seminars, the Learning Annex, webinars or paid speaking gigs. Plug your nose, and sell the dream!"

Option #3: Editing Resumes and Cover Letters

The same goes for this idea. Dave Gardner, a writer and editor with 27 years experience has a lot of practice "getting new jobs after others go south." This is one of the ways he does it.

"I've been helping folks with their resumes and cover letters," he says. "The economy makes resumes and cover letters something a lot of folks need. They need them now, they pay quickly, and they appreciate what you've done for them. It just takes a little advertising (a flyer at the local unemployment office and at the temp agencies works well) and networking when out and about."

Option #4: Selling a Story a Minute (Almost)

Outgoing? Like strangers? This idea might be for you--emphasis on might.

"There used to be a guy in Chicago who would set up his manual typewriter on a street corner and write a 2-minute novel about your life," says writer Bob Rosenbaum. "He'd ask you about five questions and then bang out two paragraphs about you with a beginning, middle and end. All for whatever amount you wanted to put into his typewriter case."

What I didn't include
You may have noticed that I didn't include those freelance boards where you compete with other writers to land short-term assignments. That's because I consider them both not writing and not useful to any kind of freelance writing business model. Think about it: It's about stringing keywords together to lure eyes to ads, not writing. And for the pleasure of doing work that isn't fulfilling, you'll get to compete with other freelancers, drive down the price, and usually pay some kind of monthly fee. That's not worth it, and I'm willing to bet you deserve better.

Have other writing-related ways to make quick cash? Share them in the comments.

Photo by zzzack.

30-Day Economic Stability Challenge: Financial Mind Shifts for Successful Freelancing

When that big check I got last month bounced, I did more than freak out--I catastrophized. I wailed and gnashed my teeth and complained to all my personal friends about it. I was in a sour mood for a while.

And then the question came to me: What if I had plenty in my account to float myself until the check cleared? How would I have reacted then?

Let's be honest: I'd still be upset. But I wouldn't have felt like I'd blown out the nerves in my fingertips and my back with panic. It would have been an inconvenience instead of a crisis.

Cashflow.

Managing it is number one barrier to successful freelancing, and I hear it from coaching clients and colleagues alike. It's also the primary way that economic stability is different for freelancers than it is for full-time employees. After all, when you're employed by someone else fulltime, your finances are structured around that twice-monthly infusion of cash. You run things down to the bone and make purchases secure in the knowledge that the cash will be there Tuesday. And if you don't quite have enough, it's okay--throw it on a credit card and pay for it in a few days.

As freelancers, it's a totally different ball of wax. That's why in this challenge, we'll share several opinions--professional and otherwise--about how to deal with the problem of uneven cashflow. Today, I want to start by laying out the mind shifts that have to take place to spend--and save--differently as a self employed person.

Mind Shift #1: Self-employment isn't just full-time employment on steroids.
Freelancing is so completely different from full-time employment. You have to do things yourself that in the past required one phone call then an afternoon complaining to your cube-mate. (When my Internet went out this weekend, I found myself spending my day off waiting for the Internet-repair guy to show up.) What you get paid for is different. (Hint: It's not your marketing, admin or the waiting around for the Internet-repair guy.)

So why wouldn't finances be different too? It seems obvious, but it's often bewildering to new freelancers, myself included. However you've structured your finances in the past, don't assume you can just make self-employment look the same. Eventually, you may get to the point that you can pay yourself a salary on the first and the 15th, but until then, you have to structure spending, payments and funds allocations differently. You can't run your account down to zero and hope the check shows up the day it's due--if you even know when that is.

Mind Shift #2: Credit is not your friend.
Given the current credit crisis, this may not be a surprise, but there are many freelancers who start their businesses with just their determination and some plastic. Do it if you must, but I argue that the best way to drive yourself out of business is to run up external debt.

Think of it this way: You spend on your credit card to float yourself till cash comes in. You end up spending $500 for groceries and gas and whatever else. Even if you pay just the minimum on that, you've likely added another $50 to your budget for the next several months--or you've added $510, $550 or even $1,000 to your expenses, depending on how quickly you pay it back.

As a freelancer, the name of the game is to keep your expenses consistent, knowable and productive. When you're constantly spending and paying down debt on credit cards, you're messing with a basic of your economic stability. And you've added a very large payment category that would be better spent towards savings, office equipment, lunches with potential clients or classes.

Mind Shift #3: Welcome to the United Bank of You
Despite last month's financial freak-out, I didn't resort to credit cards to float myself until the check arrived. Why? Because now I float myself my own credit, in the form of accruals in an online high-interest savings account.

A better approach than relying on an external company to provide credit is to keep money around, in your own checking, in your savings, in online savings accounts or elsewhere. I'm sure people will argue that using credit is an easy way to keep your finances stable by avoiding feast-and-famine cycles. But a better way to do that is to be constantly marketing, constantly selling, on top of invoices and diligent about putting a little away each month. That way, you aren't increasing your monthly expenses and you're keeping your finances stable.
Mind Shift #4: There are lots of ways to say savings.
In business, there's such a thing as an operating budget, prudent reserves and accruals. For freelancers, those are all ways to say savings. Here's why--it's one of the most important things in business survival. Here's what they mean:

• Operating: An account you create for yourself that has money in it that's allocated for nothing but keeping your business operating, no matter when the next check is scheduled. I call this my "cashflow" account.
• Prudent Reserve: This is money you plan not to touch unless there's an emergency. Even if there's $5, it's $5 towards financial stability.
• Accruals: Need a new office chair? Want the new version of MS Office? Know your computer or printer is on its last legs? Stash the cash in these funds to keep your business in business.

Mind Shift #5: Earning enough isn't enough.
When I was starting off, my only goal was to cover my monthly expenses. It was a worthy and noble goal. But I learned quickly how insufficient it was if I hoped to make freelancing a sustainable prospect. There are always expenses you weren't expecting--always car, computer or other repairs that need making. And then ther's the need to float yourself money, to cover expected trips to the doctor, or to cover bills you forgot about.

I can guess that many of you new freelancers are blanching at the news. I don't say this to scare you. I say it because changing the way you approach your finances will help you, even if it scares you at first. You don't have to do it perfectly. You don't have to be hard on yourself about it. But you can set an intention, fold it into your business plan and marketing strategy and make a try at it every day. That's how you'll have the money.

What mind shifts did you experience when you went from permanent to freelance work? I'll share them in a later post if I get enough.

Photo by Howdy, I'm H. Michael Karshis.

30-Day Biz Planning Challenge: Checking On Progress

Day 3's goal: Reflect back.

Yesterday I wrote about what I hoped having a business plan would have done for me this year. Did it work?

My general sense is yes. I've had an incredibly abundant year. You wouldn't know by looking at my business we were in a recession this year. My income is near the highest it's ever been--whether working for myself or for someone else full-time. Plus, I've had time to do a lot of the things I love and take care of myself.

But the goal of a business plan is not to plan based on my general sense. It's to be concrete and see what worked. It's an inventory.

So let's get to brass tacks. In last year's biz plan cheat sheet, I listed six goals: an income goal, a time goal, target markets, outgoing clients, major new expenditures, and marketing goals.

Here's how they played out (with some generalities to protect a teensy bit of my privacy):

Income Goal:
Set at: A third more than my 2007 income.
Why: Calculated what I needed to live on plus goals for the year.
Result: I didn't hit the mark, but I will have increased my income by more than $10,000 this year if my projections for December are accurate.

Time Goal:
Set at: Spend five hours a week on querying. Record work hours by task (income work, non-income work, querying, and networking).
Why: To keep my business growing and break into target markets; to know how I'm spending my work time.
Result: Mostly successful. I didn't do it perfectly, but I did record my time from March through the end of the year. Aside from two weeks where I spent nine and 10 hours, respectively, querying, I didn't hit the five-hour-a-week goal.

Target Markets:
Set at: Five consumer pubs and about 20 custom publications.
Why: To do more of the work I love, to earn a sustainable income and be able to use my business to support a rich, full life.
Result: Some progress. Of the five publications, I dropped one, queried another four times, and have another publication considering a story idea after building a relationship with the editor through regular querying. The other two, I've queried only sporadically. Of the custom publications, I queried only a few.

Outgoing Clients:
Set at: Three clients who were no longer fitting in my business model.
Why: Either because of pay limitations or because my professional interests changed.
Result: Imperfect. I parted on pretty good terms with one, did one final story for the second and, for the third, I'm working on a story for right now. But I did drastically cut back with all three.

Major New Expenses:
Set at: Some personal (vacations, saving for Xmas without using a credit card, and moving); some professional (health expenses, computer repairs and an ergonomic office chair).
Why: To have a rich full life that clears my mind for great work, and to work more productively and healthfully.
Result: Mostly good. I saved enough for Xmas presents without having to go into debt and I did get to take vacations. I also saved enough money to start going to the chiropractor and see a nutritionist, which are huge for me. I'll be buying the office chair this month. The only down side? I still haven't moved.

Marketing Goals:
Set at: Send three queries a week to higher-paying markets. Do no query markets paying less than $1/word.
Why: To increase my income, do more features and write the stories that I want to write.
Result: I'm happy to say that I did this fairly consistently. There were some weeks when I didn't query at all, of course. And some weeks I queried more than the requisite three.

Now, does it mean the plan wasn't successful just because I didn't achieve all my goals? Not to me. The point of planning to guide myself in the direction I want to head--not to reach the destination. It's to help me track what that path might look like and give me some concrete steps to take to get there. I don't believe I would have accomplished what I did without the plan.

Do you have goals for those five categories? How did you do compared to what you'd hoped to accomplish this year?

Serenity Tip: Diversify

How many clients do you have? Does any one of them account for more than a quarter of your income?

If you're like most people, your answer is yes. As we head into a shrinking economy (or maybe we're already there--who knows) diversifying your clients is more important than ever. And it doesn't just make business sense. It makes sense for your serenity, too.

I'll give you an example: One of my favorite clients is also my longest-running clients. The money isn't phenomenal, but it's a steady stream of work on things I love to do. Then cut to yesterday, when I got that email. You know the one: The dear-john email:

Thank you for your years of service. We love working with you but we're taking this work in another direction and we won't be needing your content anymore.

Obviously, you could have knocked me over with a feather.

When I came-to this morning, I looked around me, at all the other amazing clients I also have. Of course it's upsetting to lose this client. I love them. They've been a true joy to work for. But this loss is not going to keep me up at nights. It's not going to leave me panicking and looking through my spreadsheets for how I'm going to make ends meet. It's not going to leave me worrying about things I can't control, like what I did wrong and how many other clients are going to go the same way. It's simply a very sad change in my workflow.

That, my friends, is serenity.

It's not getting and keeping your clients forever, because you can't do that. It's simply impossible. It's getting clients you love, doing your work with love and then looking for other clients.

This just happens to be the first client I've ever had drop me. But I guarantee you it won't be the last. It's part of the business. What was this week's mantra again? Just because things aren't going as planned doesn't mean they're going haywire.

So where are you looking for new clients? Are you prepared for your clients to leave?