Whether we like the topic or not, finances are something we all need to get a handle on if we're going to run a sustainable business. If you can't earn a decent living, you won't be able to manage for long. In this post, I'm talking about some healthy financial habits to adopt to ensure your freelance business runs smoothly.

1. Track your time

It might seem strange to start a blog post about financial habits by telling you to track your time, but I’d argue the opposite.

One of the first things I get my mentees to do is to track their time, because time-tracking data is crucial for knowing whether you’re charging enough for your services.

The most important thing to track is how long you spend on client work, but I now track my time for pretty much all my business activities - so that includes admin, social media, writing blog posts, etc. This allows me to predict how long different types of task will take me when I’m planning ahead.

I use a tool called Toggl, and the free version suits my needs perfectly. It can take a bit of work to get into this habit and remember to turn it on and off when working, but if you make the effort it can pay off.

2. Keep detailed records

I’ve always kept really detailed records of my client projects, with everything from the number of words in the text I’m translating/editing and how much I charged to how long I spent working on it, what field it was in, and when I invoiced and was paid.

It means that whenever I get a request for new work from a client I’ve worked for before, I can look back and see how much I charged them in the past and how many words per hour I was able to translate or edit for them. This is important because my speed can vary quite a bit based on the client’s writing style and the subject area.

Plus, when I get a request for work from a new potential client, I have good data to base my quotation on. Over time, you also start to see which projects allow you to earn more per hour, which can help you make decisions for where you want to take your business.

3. Be organised about invoicing

It might sound obvious, but it’s so important to invoice promptly and keep track of who owes you money and whether or not they’ve actually paid you. This becomes so much easier once you’ve got a robust record-keeping system in place and you’re familiar with the numbers in your business.

I outsource work to other translators, and there have been several times when they haven’t invoiced me and I’ve chased and chased them to give me their bank details so I can actually pay them. If you aren’t organised about making sure you get paid, there are people who will take advantage and then you’ll never receive that money.

4. Don’t overspend on business expenses

I remember when I started out, I heard that I could claim all kinds of things as business expenses, so I paid for them even when it may not have been necessary.

At the end of the day, the more business expenses you have, the less money you get to keep for yourself. One of the things I really advocate is creating a budget for your business expenses and then being disciplined in putting money aside each month to cover it.

No idea where to start with this one? Get my free business budgeting spreadsheet here.

5. Pay yourself a consistent salary

When I started, I would just pay myself everything that I earned in the month. That was great in some months and terrible in others! I’ve now set a figure for how much I need to pay myself each month to cover my personal expenses, and then I stick to it.

If I have a great month, income-wise, I’ll leave some money in my business account - I don’t pay it all out to my personal account. Then when I have a quiet month, which definitely happens, I should have a buffer so I can still pay myself the same amount.

Doing this really helps balance out the feast and famine cycle and gives you some consistency in your income that will help if you want to get a mortgage or make any other personal financial commitments.

6. Set money aside for tax

If you don’t do this, you’re hit with a tax bill at the end of the year and you may not have enough in your account to pay it. If you set the money aside as it comes in, it’s like having it deducted by your employer. It doesn’t feel like you’re losing money in the same way as if you suddenly have to pay a tax bill out of your own pocket, and there’s no chance you’re left struggling to find the money.

7. Set your rates based on what you need to earn

If you know what you need to be earning as a minimum to pay yourself your salary, cover your tax bill, and pay for any business expenses you need, you’ll know what the absolute minimum is you could accept for any given job.

I’ve found that really helpful when a client tries to negotiate my price down - I’m quite firm in saying no if they want to pay less than I need to earn. It takes the emotion out of the decision.

If you’d like help to understand what the minimum is that you need to be earning, you might be interested in Charge with Confidence. It’s a group mentoring programme that supports freelancers and small business owners so that they’re able to make a decent living.

Over a four-week period, we’ll look at the numbers that will support you to pay yourself a consistent salary, set money aside for tax and always have enough in your account to cover your business expenses. You’ll learn to turn many of the above tasks into habits to help you run a healthy freelance business..

What other financial habits would you recommend adopting for the health of your business? Let me know in the comments!