Cash flow is the movement of money into and out of a business over a given period of time. Positive cash flow occurs when a business receives more cash than it spends, while negative cash flow occurs when a business spends more cash than it receives.
For freelancers, cash flow is critically important as it directly impacts their ability to pay their bills, cover their expenses, and invest in their business. If a freelancer has negative cash flow, they may struggle to pay their bills and may need to resort to credit or loans to cover their expenses. On the other hand, positive cash flow can provide a freelancer with the financial stability and flexibility to invest in their business, take on new projects, and grow their client base.
Freelancers should also care about their clients’ cash flow as it can impact their own cash flow. If a client has negative cash flow, they may delay or even default on payments to their freelancers. This can create a domino effect, where the freelancer also experiences negative cash flow, which can lead to missed opportunities and financial instability.
In addition to the financial impact, understanding a client’s cash flow can also help a freelancer build a stronger relationship with that client. By being aware of the client’s financial situation and offering flexibility in payment terms, a freelancer can position themselves as a trusted partner who is invested in the client’s success. This can help build long-term relationships and lead to more opportunities for work in the future.
See also: Balance Sheet, Expenses, Client Base, Retainer Fee
