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The issue of money management fills many who start out on their own with dread. But there’s no escaping it – the business-savvy get ahead. In between the fun, excitement and occasional terror of running your own gig, you have to face up to the reality that it’s a business – and must be managed like one if it’s going to succeed. 

Cash flow is key. You need the right pricing structure and a few tricks of the trade to speed up the payment process. You’ll also need to know what’s coming in and going out at all times. So let’s get cracking – from balancing the books to planning ahead, this section brings you practical business tips for managing your bottom line.

Set the right targets

A $5,000 project for one client could easily be a $20,000 job for another. So how do you know how much to charge? One of the biggest mistakes a commissioned company can make is not to bill enough for its work. 

But every project is different, so what’s the best way to calculate your fee? A lot of elements come into the equation: project specification, usage and rights, your level of expertise, turnaround time, overhead costs, expenses and how much you feel the final project will be worth – not to mention how badly you want the job. 

Your reputation has value, too, which will affect your billable rate. You know you’re a talented business, so reflect that in your pricing structure. But first? Determine your base fee. Here’s how…

Pricing the nine-to-five: The most basic form of billing is an hourly rate. Essentially, it’s the value of your work time based on the number of hours spent on a project, inclusive of all calculable expenses. It works well for smaller companies because it factors in various overhead costs such as staff wages, premises and so on. It’s also flexible for more open-ended jobs, where a client might request several revisions after the initial work is done.

Clever calculations: Broadly speaking, an hourly or daily rate can be calculated by taking your annual business costs (include absolutely everything that’s necessary to run your business, from your accountancy, legal and banking fees to annual insurance and travel costs, utility fees, any promotion and marketing, and also non-accountable costs, such as filing fees for tax returns), adding your desired yearly pre-tax income (be realistic) and dividing by your annual billable time, remembering to factor in both holiday and sick days.

Work in the extras: While an hourly rate is sound, it can mask the true cost of work and planning, omit usage fees and doesn’t necessarily take into account any extra expenses that might be incurred – the price of materials, for example. However, it does give a simple, justifiable set fee, which many businesses use as a basis on which to generate their initial quote. Any extra time or expenses incurred outside of this are scrupulously recorded and billed for in the final fee.

Flatten it: Charging a flat fee for a project, based on your hourly rate multiplied by the time the job takes, can work well for regular work when you have a good idea of the time involved – a regular production of a similar item, say. But if the client suddenly demands endless rounds of time-sapping revisions, then your company is immediately out of pocket. Be very clear about what you are prepared to do when negotiating a flat fee.

As with an hourly fee, make sure that you’re able to adapt to any changing project demands; don’t be afraid to revisit your original estimate if the requirements of a project change – this can be written into your terms and conditions.

Name your price: It isn’t just about charging for time – your professional reputation hangs on your ability and prowess, so factor your unique skills into your fee. As your company’s reputation or size grows, it might make more sense to move to a more ad hoc approach to billing; that is, varying it from client to client and project to project.

What’s the budget: This becomes particularly relevant once you know that the client has approached you specifically for the distinctive style of your business. In this case, you know they’re willing to pay for that style, enabling you, to some extent, to name your price. Similarly, if you know your client is working with a sizeable budget, an ad hoc approach will enable you to take this into account when calculating a fee.

Royalties: In any job involving royalties paid to you for use of your work – on clothing, for instance – ensure the terms are made absolutely clear. The ‘normal’ royalty rate is anywhere between two and ten percent of the item’s retail price, depending on the item. Rates can increase after a certain number of items have been sold, too. Negotiating royalties can be tricky, so it’s always best to consult your accountant or legal advisor beforehand.

Invest time in terms & conditions


  • Explain payment terms: include information about how and when you will deliver, and how and when you want to be paid (30 or 60 days from the date of the invoice, for instance).
  • Account for late payments: assert your right to charge interest on late payments, and include a cancellation and rejection fee clause.
  • Know when to terminate: specify when and how you can terminate a brief with a client. Such provisions usually state that either party may terminate the agreement with a set period of notice; and detail when it can be ended immediately, such as failure to make payment.


  • Neglect your rights: make sure you have retention of title and retention of copyright clauses in your T&Cs. These mean that no rights will be transferred until you receive full payment.
  • Wait until it’s too late: to legally incorporate your T&Cs, they must be included at the point of contract. Email them to prospective clients when responding to an initial inquiry and also on accepting a brief.
  • Forget special terms: If a client insists an agreement is subject to its standard terms, read the contract carefully. If necessary, try to negotiate some special terms in writing that protect your business primarily. Don’t put yourself at risk.

Managing your cash flow

Being in control of what’s flowing in and out of your bank account is vital if you want to be a success.

What’s in the bank?: perhaps a more important question is what’s coming out of the bank? And when is that going to happen? Even if you don’t handle the day-to-day finances yourself in detail, having an overall view of your company’s money matters at any given time is crucial – you are the one in charge, after all.

Invoice in detail: when invoicing, make your payment terms very clear, both in terms of when you’ll be paid and how – a direct transfer, for example, is much quicker than a cheque. Ensure the client doesn’t have any unusual or lengthy payment clauses that they might have ‘forgotten’ to mention. For more top invoicing tips, turn the page.

Stagger Payment: whenever possible, try to negotiate an up-front payment, particularly when working on a fixed-cost project. This can help massively with your cash flow, and will be a lifesaver if anything delays the project or if you incur further expenses. But don’t get into the situation of relying on these kinds of payments just to pay the bills.

Set aside tax: no, that doesn’t mean ignoring it… You need to make sure that you budget monthly for your tax bill, which will be paid once or twice yearly, depending on your situation. Unpaid tax is not only a massive financial worry, it can also snowball due to penalty charges and interest on the amount due.

Pay your staff first: your team members may take priority over any other expenses, so always pay them first, followed by any freelancers or other outsourced contractors. Pay other bills as soon as you can – you don’t want your team to be homeless. As the business owner, your own wage can be the last one that comes out of the bank account.

Add interest: the Late Payment of Commercial Debts (Interest) Act 1998 means that UK businesses are entitled to charge interest on late payments after a certain period of time. In the US, the law is made at state level. Consult your legal advisor about this. Clearly, though, this is something to be used as a last resort because it’s unlikely to endear the client in question to you.

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This article is not intended to provide tax, legal, accounting, financial, or other professional advice. Always consult a qualified professional about your personal situation.