But it’s not all bad!  You can calculate what kind of an income you’ll need to make in order to make ends meet.  Doing this exercise before you take the plunge will help you gauge the kind of risk you make be getting yourself in to.

There is a solution to this problem, and it can be implemented into your business right away. You simply need to plan ahead. First of all, decide what amount you need to earn each week to make ends meet.

Once you know how much you need to earn each week, take that amount and multiply it by 55. Then, take that number and divide it by 52. This is the amount you need to earn each week to cover your expenses, plus a 2 week vacation and 5 sick days.

Your best bet is to set up a separate checking account and deposit your earnings into it. Each week, you simply take out the amount of your paycheck – the amount you need to make ends meet.

Remember, your goal is to be earning more than that. Keep the extra in the bank and only take out the amount you need. That way, the extra money will be there when you want to go on your vacation or take a day off when you are sick.

Invotrak can help you with this task, as it will allow you to keep track of your income and the amount you are earning per hour. If you find that you are not earning enough to meet your goals, you will know that you need to find more clients or increase your hourly rate in order to meet your weekly goals.

By taking some time to plan ahead, you will eliminate the stress and fear of having an unstable income. This will help you enjoy the freelance life even more.

As freelancers ourselves, we’ve often had to deal with the very same issue.  Through our work with our online invoicing app Invotrak we’ve found five simple strategies that statistically seem to work.

Invoice Amounts

First, we took a look at the correlation between the time it took to pay an invoice and the amount due.  Is it possible that invoices for larger amounts regularly took longer to be paid?  Intuitively, it seems so, and the data backs it up:

Our research shows that, on average, invoices for smaller amounts (less than $500), tended to be paid within about 33 days.  As the invoice amount went up, however, so did the time it took to receive payment.  The lesson here is to invoice early, and invoice often.

Terms

Every invoice you issue has a due date attached to it.  One seemingly obvious fact: invoices are more likely to be paid on time when their terms are longer.  But there’s more to it than that.  For instance, take a look at the following graph:

If you’re insistent on shorter payment times, you’re in for a world of disappointment in the 14-day and shorter time periods.  Our research has shown that over 75% of invoices issued with a 10-day payment window become overdue.  Invoices with a term of 45 days are far more likely to be paid on time then invoices with 30-day due dates.

There’s a number of possible reasons for this.  For instance, clients may be accustomed to getting 30-day terms and know they can often push these terms by a few days (and encountering 45-days throws them off).  Or, perhaps clients pay all their bills in batches, regardless of when the invoice is due.

Whatever the reason, if you’re interested in getting paid on time and avoiding friction with your clients, go with the 45-day term instead of the typical 30.

Invoice Reminders

Another strategy to getting paid on time is to send out reminder notices to clients about upcoming invoices.  These reminders, often automated and sent several days before the invoice is due, are usually encouraged by experts.  Do they actually work though?  Let’s take a look at the average days to pay an invoice for each of four popular invoice terms:

According to our research, not really.  For instance, overdue invoices issued with 30-day payment terms averaged payment 6 days late.  Invoices with automated reminders sent out did … almost identically.

This lends itself to the conclusion that clients aren’t typically forgetful of invoices and need reminding; instead, they are planning to pay the invoice on their own schedule.

Of course, you need to judge for yourself.  If you have a client that seems to be forgetful of invoices, (or needs a subtle reminder that you’re serious about due dates) you should send those reminders.  Simple, automated reminders can be a great way to nudge clients without introducing friction.

Secrets to Getting Paid On Time

So what’s the secret to ensuring you get paid on time?  Here are the key lessons:

1. The norm for most invoices is 30 days.  Clients tend to expect these terms and are likely to structure their own finances around it.  It’s not unlikely for clients to send out payments for many vendors at the same time.
2. If you’re worried about tension in the relationship, consider using 45-day terms instead of 30.  It’s more likely clients will pay within those 45 days, creating less cause for arguments or awkward notices.
3. Invoices for smaller amounts were more likely to be paid faster than invoices for larger amounts.
4. Invoice terms of less than 14 days are routinely late.
5. Sending out reminders several days before an invoice is due can be helpful in some situations but didn’t have a noticeable impact in our research.

Ultimately, you’re the judge of your own situation.  You know your clients, their habits, and how likely they are to accept certain terms.  If you have the flexibility, try to invoice for smaller amounts on a regular basis.  What strategies have you used to get paid on time?

Every business that has any interaction with customers on the web (in other words, if anyone is going to your business’ site) needs to pay attention to several factors that affect credibility.

Stanford University produced a report called “Stanford Guidelines for Web Credibility” which, among others, made the following suggestions:

• Establish the business’ legitimacy
• Look professional
• Use restraint in promotional content (ads, etc)
• Update content regularly
• Avoid errors of all kinds (no matter how small) and make it easy to verify accuracy of information

Establishing Legitimacy
One of the keys to establishing credibility is to first prove legitimacy.  In other words, is the business’ physical address posted?  Are there photos of team members?  Is there an easy way to contact the business?  Indicators like this prove that there is actually someone behind the site.  The human element is critical to establishing legitimacy.

In addition, the study suggests that content on the site be tailored to promote the organization’s expertise in the products and services it provides.  Showing off the credentials of experts in the organization can help establish legitimacy and trustworthiness.

Look Professional
Part of the “look professional” suggestion is further evidenced by a post from Kent Shaffer, who says “60% of the decision to buy a product is based on color.”  He cites a Nature.com article (which is behind a register wall) with the following key takeaways:

• If you can snare people with an attractive design, they are more likely to overlook other minor faults with the site, and may actually rate its actual content more favorably.
• Potential readers can make snap decisions in just 50 milliseconds.

The only way a potential customer to a business’ website is able to make a snap decision is based on presentation: if the design of the site looks professional, is easy to read and attractive to look at, that snap decision is far more likely to be in favor of sticking with the business’ message than navigating away.

Avoid Errors
Another key finding in the Stanford study is the avoidance of errors.  It’s my contention that users are always looking for a reason to distrust a site, and it’s very easy to find one on sites with broken links, bad grammar or spelling mistakes, or (especially) factual errors.  Even trivial mistakes can hurt credibility.

Taking it further, however, is to build credibility by citing sources.  From the study: “You can build web site credibility by providing third-party support (citations, references, source material) for information you present, especially if you link to this evidence. Even if people don’t follow these links, you’ve shown confidence in your material.”

Keeping content updated and properly citing sources can be a key way to establish credibility among potential customers.

Conversions through Credibility
It seems the keys to building credibility for a business is to have an appealing design, quality (and regularly updated) content that is free from errors, and employing simple methods to establish legitimacy.

As Shaffer said, “Users who trust your site are far more likely to become customers.”  Create a credible site to bring in customers without turning them away.

Other Resources

• Problogger: Blog Credibility and Blog Design
• Michael Reynolds: How design affects credibility on the web

What tips do you have to create credibility on the web?

Job Sites – Freelancing is gaining in popularity, and many employers now understand the benefits to hiring them. There are many freelance job sites available to help bring employer and freelancer together.  Some popular choices are www.guru.com and www.elance.com.

Don’t forget to look at your local Craigslist and even your local paper’s classified section. You never know when you’ll find a great opportunity.

Social Media Sites – Interacting with business owners on sites such as Facebook and Twitter can be a great way to find new clients. Remember though, that social networking is about building relationships. If you start out by creating a profile and immediately spamming people about your services, you won’t get very far.

Instead, offer valuable information. It’s okay to tie in what you do and how you could help a business. You’ll be surprised at how many people approach you and ask for your help.

Traditional Networking – The internet has made it very easy to network with people from all over the world, but that doesn’t mean you should ignore your own backyard. Interacting with local business owners is important. Some people prefer to work with local freelancers, so make sure that the businesses in your area know you are available. Call your local Chamber of Commerce and find out when their next meeting is. This is a great way to introduce yourself to your local business community.

Word Of Mouth Referrals – Let your current clients know that you have openings for new clients. Your current clients interact with other business owners, and since they know the quality of your work, they will feel confident in recommending you to their associates. As an incentive, offer your current clients a discount on future work for each new client they refer to you.

Just Ask – If there is a company that you would love to work with, write them and let them know. They may have an opening that hasn’t been opened to the public yet. And if they don’t, they may keep your letter on file for when they do.

Tell People What You Do – Most importantly, don’t be afraid to tell people about your services. It’s okay to bring it up in a conversation. The person you are talking to may not need your services, but they may have a friend who does, or they may have heard about an opening.

Using a system like Invotrak can make this process easier. When you use this system, you will be able to keep track of your invoices and earnings. Each month, you can print them all out and add them up to keep track of your total monthly income.

You will also want to keep track of your expenses. Remember to include all business expenses, including business supplies, lunches or dinners with clients,  expenses associated with attending workshops, seminars, and conferences, as well as a portion of your rent or mortgage and utility bills (if you work from home).

It is always a good idea to check with a tax professional before you deduct anything. Laws can change from year to year and it is always better to make sure you are following the tax code.

You can purchase some large manila folders and put all of your monthly invoices into a folder. Smaller manila folders can be used to store receipts and then placed in the larger folder. This will keep proof of income and expenses together, in one place. Each month of the year can have its own folder; take it one step further by writing down the total for income and expenses on the back of each separate folder. The group of folders can then be placed in your filing system.

When it comes time for tax season next year, you just need to get out your group of folders for the year and use them to complete your taxes. Of course, keeping a running expense on a spreadsheet can also be helpful. If you choose to get your taxes done by a professional, you can simply print out the spreadsheet and give that to them, along with your income total. This will help them make quick work of your taxes.

Over the last few years, as a small web development company co-founder, and from running an invoice tracking service, I’ve collected some good advice and useful tips on how to ensure the cash comes in. I’ve found that clients often fall within one of three categories:

1. All paid up, on time, with minimal or no hassles – keep these around!
2. Wants to pay, but has to go through their company’s accounting department. Your point of contact isn’t the same person who writes the checks, and as a result, they often need to go to bat for you to get you paid at all, let alone on time.
3. Not at all interested in payments – either attempting to get out of their obligation or purposefully dragging their feet to make things difficult. These don’t usually leave you with much of a choice: go to court (often small claims court), factor, or forget about it.

Let’s talk about how to streamline category 2 client payments: your point of contact likes your work and wants to see you get paid, but they aren’t the ones who control the checks. Here’s a couple tips for when it comes time to send an invoice:

• The first step is to cover the invoicing basics. The invoices you issue should always contain as much information as possible about the work you did, including contact information, your (or your company’s) name and address, and a description of the work. Include as much additional info too, such as a PO number (if applicable) and your point of contact at the company. Your goal is to provide all the information the accountant who will write the check could possibly need, making their life as easy as possible. If they have to go digging for info, they’re likely to put it off.
• If you can afford it, you may want to consider offering a slight discount for prompt payments. Utility companies often do this: your total amount is listed and due within the agreed-upon time frame, but they also provide, say, a 1% discount if paid within 1 or 2 weeks. You can include a line like “1% 14, NET 30″ next to your Total line if you’d like to try this. If your client pays within 14 days, they can take a 1% discount, which should hopefully give them enough incentive to write the check on time.  There are a number of different discount strategies you can try too.
• Try sending reminder emails. If a client has a history of late payments, try sending friendly reminder messages a few days before an invoice is due. It’s especially helpful if you know who is writing the check, but sending them to your point of contact can be helpful as well. You can have invotrak automatically send a reminder out to your clients 3 days before an invoice is due.
• Make it clear in your contract – before you start working, of course – that you expect to receive payment by the date on the invoice. This drives home the point that a check should be in your hand by that date, rather than hearing things like “the check is in the mail”. Being explicit upfront means you’re serious about being paid for the work you do, while still being professional about the matter.

Sometimes there’s just no avoiding it: your client is consistently late in paying you, no matter how hard you try to nudge them into paying you on time. In these cases, you should determine how long it usually takes them to pay an invoice (invotrak has a Reports feature that provides this info) and factor this into the rate you charge your client for future work. You can even try telling them that you’re raising your rate (within the limits of your existing contract) because of consistently late payments. Be careful with this one though: if they start paying on time, they’ll likely expect you to drop back to your old rate.

No matter what, stay persistent. Communicate to your point of contact when there are overdue invoices. You’ll have a lot more leverage with their accounting department if someone inside the company is pushing for you.

Additional Resources:

• Freelance Switch: Getting Paid On Time contains tips on how to create an invoice, as well as what you should do once you’ve sent it. I’d reiterate their point on communication: regularly reminding your client about their invoice has probably been the single most effective tool I’ve used in the past.
• This article at Entrepreneur.com: Get Paid On Time details a number of steps you can take to improve your overall collection rate. A few might be a little extreme (such as joining a union), but sound advice nonetheless.
• For some basic information on how to create an effective invoice, check out Web Worker Daily: Creating Your First Invoice