Improve Your Freelancer Cash Flow: Track Your Time (Accurately)

I learned about the importance of tracking time from when I worked for a small, woman-owned manufacturing company.

One of my responsibilities to was to determine the profit / loss on each job we completed. The process flow worked liked this:

  • We received the signed PO from a company.
  • A job card was then created, along with all the paperwork associated with job (e.g. blueprints, drawings, etc.).
  • Once all the materials were received, the people on the shopfloor would get to work. We used time cards that had perforated slips; as people punched in and out of jobs, they would affix these slips of paper to the job card.
  • Once the job was completed and shipped, I would then add up all the time and materials and divide these numbers by the dollar amount of the job to arrive at profit / loss.
  • Then each week at our staff meeting, we’d go over the jobs to figure out ways to improve our process and troubleshoot why we lost money on a job.

I carried that process into my own business and have been tracking my time now for 19 years!

I’ve used various time tracking tools over the years. When I first started, I noted my time manually on a sheet of paper and then as technology improved, used software applications. For the last seven years I’ve used Harvest time tracking software.

I can’t say enough good things about this application (and I don’t want this to be a post about why you should use it specifically), but suffice to say, Harvest is flexible in that you can set up projects and associated tasks based on how you work.

Harvest Project Screen

Harvest Project Screen

It’s quite reasonably priced at $12 a month per user (e.g. employees or contractors) with no limit on projects. It also includes invoicing, allows you to track material costs, and syncs with a number of applications you might already use, such as Xero or Basecamp.

If you’re not using a time tracker, be sure to check it out. The link is non-affiliate.

Why tracking your time can improve your cash flow

In the last two years, as I’ve worked to improve my cash flow, I’ve relied on Harvest to help me understand where my time is going. The more I rely on it and the data it gives me, the more efficient and profitable I become.

Here are some of the ways tracking your time can help you with regard to cash flow.

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Cash Cushion Success: Think Micro Amounts

Big changes happen incrementally. It sounds like a cliché but it’s the truth. I’ve learned this since publishing Cash Flow for Freelancers and with my journey of becoming a cyclist.

Five years ago, I signed up for a 20-mile ride through MeetUp but I hadn’t been on a bike in years. My ancient clunky hybrid had been hanging dormant on the wall in the garage. After taking it in for a tune-up, I began riding around in preparation. I was scared to death of the upcoming ride: I didn’t have the right clothes or clip-in shoes, my bike was old, blah, blah, blah.

Taking that first step changed everything. During the ride up the NH seacoast, I remembered I absolutely loved riding my bike — so much so that five years, one new bike, and a couple thousand miles later, you can’t pry me off it. I’ve had so many wonderful experiences and have met so many nice people that I cannot imagine life without biking.

In fact, last month, I completed a 3-day, 200+ mile ride from the NH/Canadian border to the NH/MA southern border. Talk about a blast!


Loving the rain – TransNH 2017

What I find remarkable is not so much where I am today . . . but instead, all the small changes and steps I took to get here.

The same goes for finding ways to meet my goal of saving for a cash cushion. (Quick review: What is a cash cushion.) What I’ve learned in the last 18 months or so is that micro changes can make a huge difference to your cash flow — and your life.

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Cash Flow Hack: Keep Your Finances Tidy

It’s only the middle of February but my business taxes for 2016 have been completed and filed. My personal taxes are in progress.

Granted, I use an accountant who completes all the complex forms for me; all I have to do is gather up all the necessary information and drop it off at her office.

Even so, this year has been relatively stress-free in terms of reconciling accounts, fixing errors, gathering up supporting documents etc. I attribute this ease to the fact that over the last two years, I’ve built some really good systems for keeping my finances tidy.

It didn’t used to be this way, however.

In fact, my financial systems were such a mess that one year, I made a huge error, which I discovered after my accountant had filed my business tax form with the Feds. The error meant I had to redo my W2/W3, and submit my corrected forms; my accountant then had to resubmit my corrected tax form. Ouch!

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What I Learned Tracking (All) of My Inquiries for 12 Months

For a long time I’ve wanted a clearer picture of my sales process — namely, how many inquiries I get each month, where these inquiries come from, and how long it takes to close sales.

Even though I use and love the CRM application Nimble with its handy sales pipeline feature, the data I get from it doesn’t give me all the answers I want. One reason for this is that not all inquiries make it into Nimble, e.g. inquiries for services I no longer offer or if I’m not a good fit for the prospect. And, while Nimble has lots of great sales reports, it doesn’t tell me how long it takes to close each sale — which is what I really wanted to know.

Last November, I decided to track this information manually by creating a simple spreadsheet using Excel (Figure 1).


Figure 1: inquiry spreadsheet

Then, I trained myself to diligently record every single inquiry I received — including the ones for services I no longer offer or where someone would email me to say, “I referred you to so-and-so” but I never received a call or email from this referral.

At about mid-way through this tracking process, I realized a few things.

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To Give or Not to Give: My Love-Hate Relationship with Tithing

My son attends Yeshiva University in New York, and last week, the university held its first ever Day of Giving Campaign. The goal was to raise $5 million in 24 hours.

Two amazing things about this campaign: first, it was “all or nothing.” If YU didn’t meet its goal, all donations would be returned. Second, each donation was quadrupled due to three groups of matching donors.

An $18 donation became $72; $25 became $100; $100 became $400; $500 became $2,000 and so on.

I ended up watching the clock and the donations roll in on the IAMYU page — and was simply blown away by people’s generosity. People gave all amounts — from 25 cents to $10,000 — and because each donation was quadrupled, the amount raised started to increase pretty fast.


It was an AMAZING campaign and quite exciting — and yep, the university hit their goal, as you can see in the screenshot above. In fact, they ended up raising over $6M in two added bonus rounds.

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Hacking My Cash Cushion Goal with The Freedom Journal

Since publishing Cash Flow for Freelancers in January, I’ve been quite diligent about following my own advice . . . or “eating my own dog food” as Dan Lyons eloquently states in his book, Disrupted: My Misadventure in a Start-Up Bubble.

One of the pieces of advice I give in Cash Flow is to create a cash cushion to help ride the ups and downs of a variable income without having to resort to credit cards.

A cash cushion, as I explain in an earlier post, isn’t the typical six months of savings that financial planners tell people they should have on hand (those with regular paychecks).

A cash cushion is your own personal line of credit you can use to weather the events that wreak havoc with your cash flow: late client payments, a down month of sales, delayed projects, etc.

Instead of resorting to credit cards to help float your business and life, you use your cash cushion.

Creating a cash cushion is a great goal . . . and one I’m finally ready to tackle in a much more strategic way. After some analysis, I could see that to reach it, I needed to bring in additional income. To do that, I needed more sales. To increase sales, I needed to generate more inquiries — the right kind of inquiries.

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Defining Success on Your Terms: It Starts with a Vision

The local streets where I live have strange squiggles, arrows and other marks painted on the side of the road. I never noticed these markings until I began cycling and using cue sheets.

Cue sheets are turn-by-turn instructions for riders and they make it easy to follow a specific route and/or cycle a specific number of miles.

You can download cue sheets from bike clubs and other websites. Along with each cue sheet and ride description, you usually see an image of the accompanying marker: a yellow or white arrow, circle or squiggle of some sort. With your cue sheet and the road marker, you can follow the route.

As I was doing a training ride for my upcoming three-day ride for Muscular Dystrophy, I came to a juncture in the road — and was greeted with the sight of eight different ride markers, five of which you can see in the photo.


Each mark communicates its own message. The first white mark at the bottom of the photo is telling riders to stay straight. Ditto for the faded green arrow and the white arrow with two dots. At the top of the photo, the white circle and the yellow arrow (which I was following) are telling riders to turn left.

It’s really important you know which mark is “yours” and keep your eye out for them, otherwise, you end up following the wrong route or getting lost if you miss a turn (even with cue sheets this can happen because not all streets have signs or the cue sheet is wrong).

Seeing all these markers in one place reminded me yet again of why it’s so important, if you’re a freelancer or solopreneur, to have a vision for where you’re going.

Without a vision, it’s difficult to set milestones and measure your own success. Without a vision, it’s too easy to follow someone else’s vision — which can sometimes lead to less than desirable results.

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The Many Lessons Failure Can Teach Us

On our small farm here in New Zealand, I see new growth every day. In my newsletters to clients, I often relate growth on the farm to growth in business. (As an example, see my post, 3 Growth Strategies Learnt from 200 Tomato Plants.)

But despite all this lovely insight, I’ve gone and killed a sweet little fern which was opposite my desk in a cute little wall planter.

Here’s how it all went wrong and what I’ve learnt from it all.

I bought the plant in January, and told my husband that I’d water it. He cares for all the other plants at our place right now. I wanted this to be one I’d take care of and had all the right intentions: I even put “Water plant” into my Google calendar as a recurring event at the right number of days apart.

However, the warning signs were there from the very beginning. I never found a good watering object that fit into the small hanging planter space without drips going down the sides, making a mess I’d have to clean up. My husband’s watering cans were being put to good use elsewhere, and going hunting for them wasn’t part of my calendar task plan. The wall planter looks trendy, but doesn’t function well.

After a while, I deleted some of those recurring email notifications from Google. I figured the plant would be OK for a few more days, besides I had lots of things to do that day.

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Ed Gandia Includes Interview about Cash Flow in His Top 20 Podcasts

ed-gandia-imageEd Gandia, publisher of the High Income Business Writing podcast, recently celebrated a major milestone: publishing 100 episodes.

Ed started his podcast in 2013 and has made it a point to carefully screen his guests. Like many podcasters, Ed gets requests from lots of people who simply want to promote products. Ed, on the other hand, wanted to produce a quality show with guests who share advice from the heart.

According to Ed, his guests have shared their experiences with a great deal of enthusiasm.

In his 101st episode, he lists his biggest takeaways from close to three years of doing his show, as well as highlighting 20 of his episodes. These episodes weren’t chosen based on download numbers. Instead, Ed used a number of subjective criteria.

I’m very pleased and honored that he chose episode #92, “How to Manage Your Cash Flow Like a Pro When You Have Variable Income,” where he interviewed me about Cash Flow for Freelancers.

Says Ed, “A lot of misdirected financial advice comes from financial experts and celebrated authors of money management books. Dianna Huff throws the hammer down on all the ‘standard’ financial advice that doesn’t work well for self-employed professionals. [Instead], she gives specific and realistic strategies to help freelancers manage their finances and tips for living with a variable cash flow.”

Ed emphasized “variable” — which is the problem with standard financial advice. It’s geared toward people who have predictable and steady cash flow.

He goes on to say, “Everyone needs to listen to this podcast episode no matter where you live.”

Thank you, Ed!

You can find his interview of me here:

And, you can find his highlights episode here:

Why “Build a Cash Cushion” Needs to Replace the “Save 10%” Rule for Freelancers

“We have so many rules in life about everything. I say, break the rules, not the law, but break the rules.” — Arnold Schwarzenegger

Just about every financial advice book I’ve read over the years has the same piece of advice: “Save 10% of your income.”

Saving money is a very good discipline to build. We all need cash in the bank to weather unexpected events or to reach long-term goals (such as buying a house or putting children through college).

But when it comes to freelancing and managing the variable income cash flow, that “save 10%” rule is a little problematic and not as clear-cut as it sounds. Each time I read that advice I would ask myself:

  • Do I save 10% on the business side or the personal side — or both?
  • Do I save 10% on my average yearly income or monthly?
  • Or, do I save 10% whenever a client payment comes in?
  • Should I save before I pay business expenses or after?
  • What happens if I don’t make enough money in a given month to meet expenses? Then what?

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