While talking with my cousin who decided to freelance about a year ago, I began to wonder if she uses reports.
At first she started off with 2 clients and slowly began working with more. She was really surprised at how much work she had and how much her business was growing. She was so happy to see that as the months passed by, indicators show that more visitors navigate her site, more people contact her, and more projects were being signed. Working at what she loves and feels good at, is extremely satisfying; isn’t that what we all dream of as freelancers? But, we can all agree that we need something to top that off which is to know that we are doing good, we need to know that our business is profitable.
However, based on her story, she was worried because things weren’t quite adding up. Although she had work, she had clients, she had projects and she was busy, she never had money.
So we started talking about using reports to have a clear picture of what her figures are, how to interpret and understand how her business is running. To my surprise she had never actually sat down and worked with this analysis. She knows she has more projects and more work, but she doesn’t have a clear idea of things such as: how many they are, what income they represent, how much of that money is assigned to billable expenses and how much is actual income, when she should receive payments, etc.
After our conversation it was very interesting to see how all this brought some light, and she began understanding the importance behind visualizing everything in a clear and illustrative manner. When using reports you have relative data compiled that shows you exactly where you are standing. Even if you have more clients, more work and have signed more projects, that doesn’t necessarily equate to more income.
Two important things she wasn’t taken into account were: she should be reimbursed for billable expenses and she should work with in-advance payments to have better cash flow. This was an eye opener to her as she had never noticed that a big percentage of her money was destined to expenses and the biggest portion could be billable to her clients.
How often do you use reports to understand your progress? How many times do you stop to analyze your financial status?