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Achieving a Steady Cash Flow in the Gig Economy

Last week we took a look at the “gig economy”, explaining for our readers this new term that seems to have become used increasingly over the past five years or so.  Providing professional business support services, especially on a remote basis for clients online, can seem challenging and it’s often the case that maintaining a steady cash flow is difficult.  This is why so many people who do work in the gig economy value their long-term clients as it represents not only a steady workflow, but steady earnings as well. 

However, working in the gig economy, by its very nature, often means taking on one-off jobs and ensuring that you get paid for the work you do is sometimes troublesome.  This is why it’s vital to agree on a price before actually carrying out any of the work.  For those who are worried that the client may not pay once the work has been completed, there are ways you can address this issue.  One method is to divide the whole job into manageable chunks and arrange for the client to make milestone payments for every piece of the work completed.  This works particularly well for freelance workers who work solely online.  It’s also a great way for the client to ensure that they are getting exactly what they want for their investment in your services.

Building a great working relationship with a regular client is essential for smooth operations and if you’re lucky enough to find such clients, they will usually pay on a regular basis, which allows you to plan your finances with some confidence. 

Beware of scope creep when it comes to working on a freelance basis as this can result in financial problems for you.  For instance, if you take on a new long-term client, it’s often the case that they want to agree a rate of pay and some will want to negotiate a favourable rate in return for regular payments on a long-term basis.  Because you’re trying to secure a long-term contract, you may be tempted to quote lower than your usual rate.  This is fine if the work is relatively straightforward and can be a win-win situation for both parties.

However, in some instances, a potential long-term client will negotiate a good deal on the type of work you expect to do for them, only to start adding tasks at some point in the future or expect you to complete work that is far more complicated than first described.  For instance, a freelance writer may agree to a competitive rate per word (or 100 words) for writing articles/copy, etc. only to discover that the client expects hours of complicated research for each piece of work.  Or the client may send you a 35 page brief that needs to be studied in order to write a 1000 word article!  This means that the work you do becomes a less cost-efficient prospect over time.

There are also clients who you will have to chase for payment which is fine if it happens once, but if this is a regular occurrence, you need to factor in the time you spend on dealing with late payment.  With payments in the gig economy typically being relatively small, you have to decide whether or not it’s cost-effective for you to chase the debt in this way.

Next week we’ll bring you some tips on how to organise your work when working in the gig economy – why not follow us on Facebook or Twitter so you’re notified as soon as the article is published.