When clients pay late, do you blink? Do you assume that it's just part of doing business? Or that it's the fault of your client?

Is it your fault when clients pay late or not at all?

Sorry to break it to you, but it may be your fault when clients pay late or never pay at all. Some reasons clients fail to pay on time:

• You never put the contract in writing
• You failed to meet the contract terms
• You haven't got confirmation of the client's receipt of your project delivery
• You didn't send a formal invoice
• Your contract doesn't penalize late payment
• Your contract doesn't go over payment terms
• You forgot to include your name, address and contact details on the invoice
• You haven't sent a statement of account
• You haven't followed up by email
• You haven't followed up by phone
• You haven't followed up by registered mail
• You haven't applied in small claims court
• In the case of a liquidation or bankruptcy, you haven't applied to become a creditor

Obviously, you should start at the top of that list and work your way down. But, above all else, make sure you get contracts in writing. Although a verbal contract may be binding -- depending on where you live -- it's harder to prove after the fact. If you need help putting together a contract or an invoice, I recommend US Legal Forms

It's tax day today in the US. If that's a surprise to you, you should look at hiring a bookkeeper or accountant next year -- or call the tax office and file for an extension!

Related:

• Tax write off list
• Finance for consultants

Whether you're self-employed or just thinking about it, you might be wondering how you'll fare when you try to apply for a credit card, loan or mortgage. Fortunately, creditors are increasingly coming up with new credit products for the self-employed.

Self-employed or not, you'll run into problems getting credit if you've had problems with credit in the past. So request free credit reports from credit bureaus, so that you can check to see what your credit history looks like. (Note: in Canada, you can obtain these credit reports by mail for free via Transunion and Equifax, even though they try to hide that.)

Once you know what your credit history looks like, you can set about repairing it. If it turns out that you have a good credit history, applying for loans, credit cards and mortgages may not be such a difficult task.

Related to credit
Too much debt
Pay down your high interest debts first
Help reduce debt

Working as a freelancer or consultant can sometimes raise the eyebrows of landlords. They sometimes worry that you'll be unable to pay the rent month after month. Although such a scenario can occur with people no matter what their employment situation, some landlords get a bit antsy when they hear the words "self-employed" or "freelancer".

So, if you're on the hunt for rental housing, what can you do? Well, before I ever owned my own home, I ran into a building management company that hesitated to allow me to rent. To put their minds at ease, I:

• offered a bigger deposit
• asked if they wanted to see past bank statements to confirm my income history
• showed them my previous year's tax return
• asked them to check past rental references
• encouraged them to check my credit
• inquired as to whether they wanted to see some signed consulting contracts

In the end, the building management company just went with what I said. They decided that anyone willing to provide that much information must be okay. They didn't even ask for a bigger deposit. They just trusted me.

The funny thing is what happened with the gainfully employed roommate who co-signed the lease. About three months after we moved in, he disappeared in the middle of the night, quitting his job and leaving the city on the last day of the month. Suddenly, I was left to carry the rent on an ocean-view 2BR apartment in a pricey part of Vancouver. And guess what? I made good on the lease. When I eventually moved out, the rep from the building management company noted that they were impressed that someone who was self-employed kept up such high payments on their own. Then they gave me that roommate's half of the security deposit, which they technically could have kept.

It just goes to show that a regular job is no guarantee of someone's character.

April is just around the corner...start thinking about your taxes now. Via AOL, here's a list of the top 5 tax mistakes. Tip #4 refers to getting receipts for charitable donations. Ever since I realized the tax benefits of charitable donations, I've moved to a system where I will only donate if I get a receipt.

I no longer drop coins into Salvation Army pots, donate canned food to food banks, give bottles to charities or sponsor people in walkathons and the like. I instead send the donation to the charity in question and request a tax receipt. Because of the tax benefits, I'm in a position to donate more than I could otherwise. It's not that I'm stingy -- it's that I'd rather donate more!

Related to tax mistakes

• Tax write-off list

Via GetRichSlowly.org, I learned about an ebook giveaway on the Oprah Winfrey site. For Valentine's Day only, the Oprah site is offering a free copy of Suze Orman's Women & Money ebook. (Scroll to the bottom of that page.) Whether you are a woman or a man, this ebook has some great advice for consultants. Orman discusses the need to set your consulting fees at a professional level.

I've only read a few chapters, but I appreciate Orman's discussion of how many consultants (especially women) set their fees too low, do barter when they don't want to, and shy away from asking clients for more money. She talks about the need to stop putting yourself on sale -- instead, treat yourself as a professional, not a bargain basement deal.

Related to consulting fees

Consulting Fees: A Guide for Independent Consultants

When you make the jump to full-time consulting, you'll find your earnings may not be the same every month. You might have lean times during the winter holidays, but go gangbusters in the spring. After a while, you get used to it and you'll be able to budget accordingly.

But how do you save when you have such an unusual cash flow situation?

1. Add up your monthly revenues for the past 12 months
2. Divide by 12 (this gives you the average)
3. Build a budget around that average
4. Dip into your emergency fund or use your line of credit during months where you fall below the average
5. Top up your emergency fund during months where you exceed the average

So, let's say that you had the following situation:
January    2000
February         0
March       6000
April          1100
May           3300
June         4000
July           8000
August        200
Sept.         1200
October    7200
Nov.          3500
Dec             400

If you add all that up, you'll get $36,900.

Divide by 12. That's $36,900 / 12 = $3,075 per month.

So you should base your budget on monthly earings of $3,075 per month.

If, in February, you have a slow month, you can dip into your emergency fund. Then you can top it up with your March earnings.

I manage my finances pretty diligently and I always have an emergency fund to cover six to 12 months of expenses. That way, I never come up short of cash. What do you do to manage your consulting or freelance income?

Related

• When should you apply for a line of credit?

February can be a tough time for anyone, let alone consultants. Holiday fun has ended. Everyone's back to work. And the bills are rolling in. Many people take advantage of January debt holidays from their credit card companies, only to scramble to come up with the money in February.

In the past, I've discussed how to use consulting to get out of debt. I've mentioned the best ways to pay down debt.

But, if you're at the end of your rope, give your credit card company a call. Ask if they can do anything to reduce your interest rate or your monthly minimum. Creditors would often rather get paid than have you declare bankruptcy. Besides, you have nothing to lose by calling.

Related to holiday debt

• Getting out of debt - Gary's story
• Credit card debt strategy

Amy wrote to me to ask about Internet and VOIP charges. I don't know much about US telecommunication rules, so I'm putting her question up for my readers:

I have a general question - we are an IT company in Vienna, VA using shared office space, but with a very old PBX which will not allow us much flexibility. We want to use VOIP., instead, and ride over our internet connection BUT the owners of the building insist on charging us a fee (fine!) of $50 per phone (3) to do this -- isn';t this double billing, since we are already paying for the bandwidth for our internet? Anything in our FCC rules which prohibit this?

I suspect the fee is there because VOIP increases bandwidth usage. Can any of you help answer Amy's question?

Too much debt? In today's world of cheap and easy credit, many people end up with too much debt. If you're facing crushing debt, you're not alone. And there are ways out of debt.

7 ways to deal with too much debt

1. Stop spending. Put your credit cards away. Pay in cash until you've got things under control.
   
2. Do up a budget. Figure out where you're money goes each month. Determine how much you can afford to spend and stick to your plan.
3. Pay down your highest interest debts first and make the minimum payments on other loans.
4. Find extra money to pay down debts, so that you can reset your situation
5. Consider enlisting the help of a debt counselor
6. Talk to your lenders about your situation. See if you can get a debt consolidation loan, if it's right for you.
7. Get a second job

You can find your way out of debt. Once you take control of your debt, you'll take charge of your life.

Related to too much debt

• Another get out of debt story
• Getting out of debt via consulting

Many people run into financial troubles at this time of year. All sorts of emotions play into the decision to rack up debt over the holiday season. But the biggest emotions show up when the credit card bills come rolling in.

If you've got yourself in a situation where you need to pay off debt, try tackling the highest interest loans first. Consider the following situation:

• $200 on a bank credit card at 2.9%
• $500 on a department store card at 18.8%
• $1200 on a gas card at 27%
• $15,000 on a home equity loan at 7%

Although it might feel good to get rid of the $200 bank credit card debt as soon as you find $200, that's the loan you want to repay last. It's the lowest interest loan. It makes far more sense to tackle the 27% gas card first. So make the minimum payments on the other cards and put the rest of your money toward the high interest debt.

Related to debt

• Best ways to pay off debt
• Debt management via consulting
• Help reduce debt
• Paying off debt
• Getting out of debt

Money to pay off debt -- as the bills come rolling in, wouldn't you like to find money to pay off debt?

Money to pay off debt: where to find it

• sell items on eBay and other online auctions
• sell clothing and unused household items via consignment shops
• get a second job
• start a consulting business
• create a home business
• write up a budget to see where you can cut back -- then do it
• ask for a raise
• increase your consulting fees
• ask your lenders to reduce your interest rates and then apply the money you save to your debts
• consolidate your debts at a lower interest rate and apply the savings to paying off the debt

Got tips for paying off debt? Share them with us.

Related to money to pay off debt

• Best ways to pay off debt
• Debt management via consulting
• Help reduce debt
• Paying off debt
• Getting out of debt

Setting financial goals for your home business involves a lot more than just picking a number from the air and plunking it in a spreadsheet. And you need to do more than just look at last year's numbers and add five or ten percent. To set accurate goals, you need a marketing plan.

A marketing plan will help you size your market and determine how to reach it. With that in mind, you can look at marketing programs and tools that will help you build your customer base -- and thus your revenues. You can develop projections for generating leads, converting prospects and making sales. And that's what should drive your financial goals.

Related to financial goals

• Home business lead generation
• Basic selling skills
• Finding new clients

Invoice factoring -- many small businesses turn to invoice factoring as a way of improving their cash flow. Invoice factoring involves selling your accounts receivable to another company. For example, you may receive 80% of the invoice value -- the factoring company gambles that they'll be able to collect on 100%.

Benefits of invoice factoring

Depending on the terms of your contract, the factoring company will pay you upfront, assume the risk of bad debt, handle invoice processing, deposit checks, enter payments and write up reports.

If you start using invoice factoring, you won't have to worry about giving your clients early payment discounts. You can ask for lower deposit amounts, because you'll get money from the factoring company right away. Invoice factoring sounds like a great way to improve your business's viability without increasing your risk.

Related to invoice factoring

• Setting consulting fees
• Finance for consultants FAQ
  

A Rather Obvious Metaphor for Personal Finance Couched in a True Story About Physical Fitness

This is a guest post from J.D. Roth. J.D. writes about smart personal finance at Get Rich Slowly. In the past he’s done both blog- and computer-consulting.

Exercise is a funny thing. When you start a fitness regimen, you feel awful, especially if it’s been months (or years) since you’ve been physically active. The first couple of weeks can be grueling. But once you make it a habit, once you find the groove, exercise can become exhilarating, even addictive.

During the summer of 1997, I lost 40 pounds. My ten-year high school reunion was approaching, and I wanted to look good. I made it a goal to get fit.

On May 8th — clocking in at 200 big ones — I got on a bicycle and rode 2.4 miles. I felt terrible. My shorts barely fit. I moved slowly. I had to get off and walk at the big hill. I had no endurance.

I felt like a cow on wheels.

That first ride was short and painful. Many people claim that the first time you make any sort of change is the most important. I disagree. I think the second ride was more important than the first. Anyone can take just one ride. It took tremendous force of will for me to get back on that bike again May 9th.

But I did get back in the saddle, and then again the following day. I didn’t ride everyday, but I stuck to it as best I could. I kept reminding myself of the ten-year reunion.

Progress was slow at first. My mental fitness changed before any significant change to my physical fitness occurred. (Now I know that must always be true, but back then it seemed odd.) But eventually changes did happen.

My strength improved. My belly shrunk. Then one day I made it to the top of the hill without having to walk the bike. Such a small victory, but so important, too! I felt a sense of accomplishment all out of proportion with the actual achievement.

My rides began to lengthen: 3-1/2 miles, five, ten. I would reach my normal turnaround spot and tell myself, “I can go farther today!” And I would!

By the middle of August, I was riding ten miles in half an hour, when once I could only ride five. One afternoon, on a lark, I spent ninety minutes riding 25 miles through the Oregon countryside. It was awesome. I felt awesome. My legs looked awesome. I was in the best condition of my life.

In fact, by the time autumn gave way to winter, I had lost 42 pounds. When my class reunion rolled around, I was happy to attend. I was proud of what I had accomplished.

But it didn’t happen overnight. First, I had to get on the bike. More than that — I had to get back out there a second day.

Related:

• Become a weight loss consultant
• Smarts vs persistence

 

Apply for a line of credit before you leap into consulting or self-employment on a full-time basis.  Banks tend to be a little more generous with credit terms when  you've got a full-time job.  Of course, rational people will point out that anyone can be laid off from a job, but that consultants at least have several clients, which should make consultants a better credit risk. Lose your job and you lose all income. Lose a client and, well, you've still got several clients and your marketing should still be bringing more in through the door.

Still, apply for a line of credit before you ever need one. Although you'll want to avoid frivilous debt, it's comforting to know that you can cover a dry spell if you exhaust your emergency fund. And a line of credit usually provides a better interest rate than a personal or small business credit card does.

Related:

• Best ways to pay down debt
• Finance for consultants

Emergency fund -- an emergency fund is made up of savings to cover the cost of an unforeseen crisis, such as job loss or illness.

But how big should your emergency fund be? Financial pundits say you should have anywhere from three to nine months of expenses set aside in an emergency fund. For people who are self-employed, financial fitness is paramount -- try striving for the six to nine months end of the range, given the calculated risk you take in starting a small business.

How do you calculate expenses for six to nine months? Traditional wisdom suggests keeping track of your household budget for about three months, then putting aside the amount you'd need to cover six to nine months. However, in a true emergency, you might be willing to forgo cable TV, restaurants, lattes, and other indulgences.

Related to emergency fund

Finance for consultants

Financial fitness is key to the health of your small business. If you've let your personal finances get out of shape, you're going to have a hard time being self-employed, especially if you're a consultant. That's because you may run into situation where clients fail to pay on time -- or at all -- and you'll need to be able to get through both good times and bad.

If you're striving for financial fitness, I encourage you to work at building up an emergency fund. Ideally, this should be enough to cover six to nine months of expenses -- enough to see you through hard times, regardless of whether you're self-employed or working for The Man.

Looking for the best business bank account? If you're a sole proprietor, you can simply open a personal bank account at a new bank or your existing financial institution. If you use it for depositing business cheques made out in your own name, you won't need to have an official bank account. You can probably still write off the banking costs (depending on your country's laws). And, because you've kept your personal banking activities separate from your business banking activities, you'll have more protection, as mentioned in the best business bank account article.

Best bank for a business account -- if you're wondering about the best bank for a business account, you're not alone. Most business owners have to shop around before they determine the most appropriate account for their business.

Your current bank may not best the best bank for your business. If you shop around, you'll find that some banks offer incentives for new customers, such as no-fee services for a few months or a special short-term interest rate. Banks tend to make offers to win a greater share of your wallet. Moreover, by keeping your business and personal banking separate, you have a little more protection if your business runs into trouble. You don't want to be denied a mortgage because your bank isn't keen on your business situation.

Whatever business bank account you choose, be sure to weigh the fees, interest rates and services available.

Related to best business bank account

• Cashing cheques and bank accounts
• Finance for consultants FAQ
• Best ways to pay down debt

Can you afford to start a home business? Barbara from HomeBusinessWiz explores the affordability of a home business. She boils it down to three questions:

1. What do you own already?
2. How can you use your existing assets?
3. What will your start-up costs be?

As I've mentioned before, starting a consulting business is cheap. It's an affordable home-based business. Most people already own a computer, printer, telephone and perhaps a few home office supplies. If you create some business cards and start networking, you'll be on your way to running your own consulting business. In comparison, starting a restaurant or a retail store takes a lot more cash. And consulting makes a great second job, so you can start it a little at a time. Once you hobble together some money, consider putting together a website.

Help reduce debt -- start consulting as a side job and you can help your family reduce debt. With household debt levels at $9,000 just for credit cards, it's no wonder many people are looking for ways to pay down debts.

The best way to stop debt from accumulating is to stop using credit. Quit using credit cards and lines of credit. Reduce your expenses and start pursuing the best ways to pay down debt.

But what if your debt load is out of control? What if you don't have the money to make your credit card payments? It's hard to get out of debt if you can't even pay for your groceries.

Debt and bankruptcy consultants often recommend returning unused items for refunds and holding yard sales to generate money. But if you've created your debt from intangibles like restaurant meals, trips, movies, music, alcohol and other things that just disappear, you may not have anything to sell or return.

A side job or work from home job can be a handy way to generate extra cash. And it's often pretty easy to go pick up a minimum wage job. By working weekends, you could earn an extra $500 or so a month, depending on your minimum wage.

But, if you're looking for a more lucrative means of paying down debt, think about becoming a consultant. You could be making $50 or $150 an hour. You could work fewer hours to pay down debt...or work more and pay it down faster.

More about getting out of debt:

• getting out of debt via consulting
• debt management via consulting
  
• consulting business ideas
• personal finance for consultants FAQ
• setting consulting fee rates
• best ways to pay off debt
• side jobs

Given the time of year, I know some of you are struggling with credit card debt. If you are having a tough time keeping up with the payments, consider contacting a debt counselor, especially a government-approved organization. In the US, see the Department of Justice credit counselor list.

Posts related to credit card debt

• Get out of debt via consulting
• Best ways to pay off debt

"Credit card debt strategy" from Become a Consultant at ConsultantJournal.com.

Following up on my previous post about cashing your first check, I thought I'd mention how important it is to set up a separate bank account for your business.

Now, if you're a sole proprietor, you can deposit checks to your personal account. But it makes for messy books, unless you're an organized person. If you don't have the budget to open a small business bank account, consider opening a second personal account. As long as the checks are made out to your name, you should have no problem cashing them. For the most part, the government doesn't care whether you have a "business bank account" -- they just want to see that you treat your business like a business.

"More on cashing checks" from Become a Consultant at ConsultantJournal.com.

Best ways to pay off debt -- last week, I emphasized how consulting can help you get out of debt. At this time of year, as credit card bills roll in, people often start wondering how they're going to manage. I've previously explained how my friend used consulting to get out of debt. It's a good way to generate a second income at a high hourly rate.

Many career coaches will say that you should only pursue work you love. And I generally agree. You don't want to do work that makes you miserable. But, sometimes, there's no greater joy than digging out from under a giant burden. For many people, financial freedom is an important dream. By starting your own home consulting business, you can start paying down debt and get on the right track.

If you're currently in debt, try calling your credit card company and explain how you're struggling to make ends meet. Ask if they can reduce your interest rate. You'd be surprised how many banks and credit card companies would rather reduce your rate and get the payment, as opposed to having to send you to collections or risk you declaring bankruptcy.

Related Posts

• Finance for consultants FAQ
• Consulting business ideas

"Best ways to pay off debt - try consulting" from Become a Consultant at ConsultantJournal.com.

Paying off debt is a great way to use the money you make as a consultant. Gary (who asked that I not reveal his last name or location) wrote to say that he paid off $34,000 in credit card debt via consulting. It took him almost five years, but he was able to dig out from the burden. He made $700 a month by picking up IT contract work on weekends and evenings. By working anywhere from 10 to 15 hours a month, he got rid of his oppressive debt load. He's been debt free for a year and he now has $8,000 banked to put toward his son's college fund. Congratulations, Gary!

Related Posts

• Best ways to pay off debt

"Paying off debt - Gary's story" from Become a Consultant at ConsultantJournal.com.

Best ways to pay off debt -- people have long turned to consulting as a way to pay off debt. If you're looking for a list of the best ways to pay off debt, whether from student loans, credit cards, holiday overindulgences, life events or a job loss, consulting can help you make money so you can turn your life around.

I've previously mentioned that you can use consulting to get out of debt. Second jobs and work from home jobs can also be effective. But, as a consultant, you can usually set your fees at a higher hourly rate, such as $50, $75 or $150 an hour. Considering that many retail jobs only pay $8 or $10 an hour, you can either work less or earn more by making money as a consultant.

If you're looking for what to do with the money you earn, put it toward your highest interest payment. If you've got department store credit cards, that's probably where you want to start.

Related Posts

• Finance for consultants FAQ

"Best ways to pay off debt - try consulting" from Become a Consultant at ConsultantJournal.com.

Hurray for the long weekend! Hurray for a long weekend that has been going on all week and still has miles to go! I'm still on vacation, so here's another featured article.

Looking for extra cash to start your small business? Read about government small business loans on one of my past posts. Of course, regular readers know I am a big believer in avoiding the need for financing by making more money -- often by making sure you set your consultant fees appropriately.

"Featured article: government small business loans" from Become a Consultant at ConsultantJournal.com.