How to manage your cash flow as a self-employed worker or freelancer

March 31, 2022 by Agicap

Cash flow management is an essential skill to have if you’re a freelancer or other kind of self-employed worker. When left unchecked, poor cash flow can have disastrous consequences on the sustainability of a business. Managing cash flow efficiently is therefore paramount. So, how do you do it? Qonto tells you everything you need to know about this vital element of a freelancer's "back office."

What is cash flow management?

Simply put, a company's cash-flow (or ‘treasury’) is its bank balance. Protecting it is a challenge that’s essential to the viability of a company. However, cash flow management does not just mean taking a look at your bank account every now and then to see if there’s money there; the stakes are much higher than that. Good cash-flow management also involves: 

  • checking the status of outstanding receipts (transfers and checks awaiting collection, refunds etc.),
  • being aware of upcoming direct debits,
  • budgeting (forecasting future cash receipts and expenses),
  • ensuring the ability to pay salaries.

The objective is to create a roadmap that will help you stay on course with your cash flow. It requires two key skills: control and foresight.

Accounting management for freelancers

Efficient cash flow management is crucial for all companies and that is just as true for freelancers as it is for multi-nationals. When the missions and the payments from customers are irregular, solid and consistent cash management can keep your business healthy in the long run. While it is a legal obligation for all self-employed workers to maintain clear and transparent accounting, not all legal statuses require you to open a separate business bank account.

However, a business account does have significant advantages:

  • it removes any confusion between personal and business transactions. 
  • monitoring and managing accounts is easier if all the relevant in- and out-flows are accounted for in one, dedicated place. 

It’s now fast and easy for freelancers to open a business account for a very reasonable price.

How to manage your cash flow as a freelancer

There are several solutions that allow you to manage your cash flow as a self-employed freelancer.

Investing surplus cash wisely

When a company manages its accounting successfully, it may well end up with a cash surplus. Then, it becomes a question of how to use that surplus. A variety of possibilities exists:

  • Financial investments: the company receives a financial return in the form of interest. There are many different types of financial investments, with varying return rates and associated risks. It is important to remember that the more lucrative a financial investment, the more risk it is likely to carry.
  • Early payment discounts: excess cash can also be used to make early payments to suppliers who grant discounts to clients who pay early. Generally speaking, the discount rate is around 3%, a financial gain that’s not to be sniffed at.
  • New investments: a cash surplus can also be used to invest in developing your business. This could mean financing new equipment, premises or the launch of a new activity.

Whatever the investment, it needs to be in line with the company's strategy for development.

Save and rationalize costs

Managing your cash flow when you are self-employed requires you to efficiently track the daily in-flow and out-flow of money. In other words, it is about having the most predictable cash flow possible. There’s some good practice to help you do this:

  • Where possible, pay your costs on a monthly basis; finding the same amount of expenses from one month to the next simplifies the accounting follow-up.
  • Make provisions for those costs that cannot be paid monthly. Paying large costs early is part of good cash management.
  • Prioritize renting over buying; just like large companies, self-employed workers can also use this practice in their accounting management.

These examples of good practice allow cash to be used on items that directly impact the core business.

Anticipate your costs to avoid insolvency

A cash flow tool is an effective ally in forecasting financial difficulties. It allows you to foresee difficulties up to several months in advance. By anticipating your costs, you give yourself the chance to make changes that will not disrupt your business. Regular monitoring of your business’ financial data allows you to limit the negative impacts on your cash flow, such as the cessation of payments. 

As a manager, you must always pay particular attention to the viability of your activity by maintaining a minimum financial balance. Having a dashboard that includes strategic indicators, a cash flow plan or a budget tracker will help you to see problems coming before they arrive.

How to forecast and interpret cash flow

A cash flow forecast allows you to identify all the cash receipts and disbursements of your company. In other words, the money coming in and going out. This forecast is a roadmap that will enable you to follow the financial health of your business and is an essential tool for several reasons:

  • you can ensure that you will be able to meet future spending needs,
  • you can evaluate the capacity of your company to finance its growth,
  • you can anticipate slow periods when you’ll work less (or not at all).

With a thoroughly drafted forecast, you can avoid nasty surprises.

Use a cash flow plan to get started

A cash flow plan is effective both in the day-to-day running of an economic activity, and also during the business creation phase. 

Cash flow plan

Essential when creating a company, the cash flow plan highlights the financial needs of a business. It allows you to compare the projected cash flow with the budgeted costs. 

It is divided into 3 main parts:

  • Cash receipts (money in),
  • Disbursements (money out),
  • Cash balance (total funds in your account).

Cash receipts

With regard to cash receipts, several elements must be taken into account:

  • projected turnover (incl. VAT),
  • capital contributions,
  • current account contributions,
  • subsidies,
  • financial products,
  • tax refunds.


For your spend, we are talking about data referring to such things as :

  • investments,
  • purchases (incl. VAT),
  • overheads (incl. VAT),
  • taxes and duties.

Disbursements highlight the company's financial needs.

Automate your cash flow using online tools

Automating your cash flow management means you don’t have to do it manually yourself. That means you gain time, energy and peace of mind. There is a wide variety of online tools that collect your financial data and allow you to analyze it in real time. For example, Agicap is a 100% online software. It allows you to manage your cash flow automatically and without human error, to gain visibility over your accounting and to get the data you need to make important decisions.

Adopt the right habits for the future of your business

Properly managing your company's cash flow, ideally from the start of your business venture, allows you to adopt the right habits and make the company financially sound. 

Accounting follow-up

Thanks to close and effective follow-up of your accounting, you can identify :

  • VAT,
  • social charges,
  • professional expenses,
  • taxes,
  • all other projected expenses.

Remember to keep this data in case of an audit.

Slow periods of activity

Being independent can mean having slow periods, when work is more scarce. There are several reasons for this:

  • working with only one client,
  • lack of self-discipline and poor schedule organization 
  • outside factors (for example, pandemics).

Efficient freelancing requires you to plan dedicated time slots for the accounting, administrative and commercial management of your business. The common mistake is to devote 100% of your time to your client missions. Thanks to your cash flow management, you can anticipate these slow periods without worrying about your finances.

Seek professional help

Not all freelancers are able to master business accounting management, especially in the early days, so don't hesitate to get help from experts. Financial advisors can quickly analyze your situation, your needs and your constraints. You could learn greatly from personalized recommendations regarding the daily management of your cash flow.

Managing your cash flow as a self-employed worker is an integral part of your business. Unlike a "classic" company, a solo entrepreneur must carry out the whole range of management tasks all at once, including the accounting. Staying on top of your books allows you to pilot, nourish and grow your company with less stress. Account management software is a valuable aid because it saves time and makes key company data available in real time. Agicap (to discover Agicap click here) has an abundance of useful features that can be adapted to all types of activity.

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