Guest Author - Sharlene Thomas

When you are working for someone else, keeping an eye on your income and retirement fund growth is easy -- just hang on to your pay stubs. For the self-employed, however, it's a little trickier -- no steady paycheck and monies come in as gross dollars.

Retailers watch daily cash receipts but still won't have the whole picture if they also offer payment plans on large ticket items. Damaged goods, returns, overstocks, theft, and price reduction sales -- these are a few reasons the bottom line can be so elusive.

Freelancers Are at Whim of Client Paying Habits

Freelancers offer invoiced services and keeping track of income is even more difficult without help -- either by doing their own recordkeeping or hiring a bookkeeper. Once invoiced, the lag time between invoicing and payment can vary from 10 to 45 days.

You are always at the whim of the individual client's payment habits or the regulated procedures of corporate clients. A contract stating exactly what services are being offered and accepted, along with a payment schedule, is the freelancer's best friend. Fairly standard language is: a one-third deposit, a third at midway, and the balance upon completion. Offering more "creative" payment options is where most problems start.

Understand Who Controls Client Payment Schedules

Some clients pay on receipt; others forward invoices to the Accounts Payable department. You have entered the client's accounting cycle -- payments can be disbursed on a ten-day, bi-monthly, or 30-day schedule.

Invoices not sent as soon as the work is done, or those your client is slow in forwarding, may place you between schedules, extending your payment by as much as 45 days.

There are also clients who accumulate all project invoices, paying only when they receive a periodic draw from the bank. Subcontractor's agreements explain the payment schedule, and the dated signatures bind both sides to those terms.

When working with government projects, weekly reports are often required specifying exact clerical and manual labor hours per project phase during a standard workday. Not completing the forms exactly as required can delay payment up to 60 days.

Cash Flow is Seriously Affected by Government Contracts

For the young entrepreneur, taking on these projects can seriously affect cash flow and the ability to pay one's own bills. Large projects take up the time available for other clients and short-term bridge loans may be needed to meet your own obligations before the project is finished.

With enough support funding to get you through the first few billing cycles, government contracts and long-term single-client projects are definitely a way to build a strong, successful business. Don't be afraid of bidding; know what to expect.

When your invoices are not paid directly by the client but by their client, a third party, you have a different set of problems. This frequently happens in the legal field where everyone is waiting for the trial to end before paying for transcripts and expert witnesses.

There is no contract. You've been called to do the work and know that payment will come -- well, later. Meanwhile, you have expenses. Entrepreneurship is truly a living on-the-edge experience. Bill your client, not theirs. Receivables grow dramatically under these circumstances. Months of rebilling, adding late fees, can go by and the payment check is cut for the original invoice amount. Discount the late fees, and move on.

Collecting Payment Isn't Over Till It's Over

Whatever you do, don't stop rebilling until you know you have, in fact, an uncollectible debt. The law looks for consistency. One or two invoice copies, a year after initial billing, doesn't reflect consistency. If you don't care enough to chase your money, they won't.

Know the standard payment procedures for your chosen field and have a resource for back-up funds to help you over that first year getting established. For some sole proprietors, keeping track of receivables can add several hours to an already exhausting day. Long-term single-client projects are not nearly the headache that one-time invoicing many clients can be.

The length of time between invoicing and payment determines the health of your business. Receivables representing more than 40% of your client base require constant attention or, without help, it's very easy to lose track.

If you don't understand administrative work, find out how to do it or find someone to do it for you. Knowing what to expect, careful planning, and being able to meet your own expenses, will determine whether or not you should continue running your own business. There's no shame in working for someone else -- there's less stress and it's a sure-fire way of keeping track of your future.