If you're having home business cash flow issues, a partnership between FreshBooks and Fundbox allows you to get money for unpaid invoices now.
As a freelancer and home business owner, cash flow is the bane of my existence.
I love what I do, and I love the freedom I have in my lifestyle. The downside to what I do is that sometimes I have to wait for clients to pay their invoices. There is nothing more depressing than opening my FreshBooks account and seeing this:
And, actually, since it's only the 10th of the month, this isn't even that bad. I've “only” got a little more than $1,000 that's more than 30 days outstanding. The other nearly $3,000 is from the most recent round of invoices. Hopefully, in the next few days that money will start trickling in.
(Thank heaven for the non-U.S. clients, who aren't represented on the above graph. My international clients are?invoiced directly through PayPal. My non-U.S. clients — Canadians, Israelis, Brits, and Ukrainians — pay almost immediately, and they are the reason that things don't get out of hand.)
It's that cash flow difficulty that makes being a freelancer so frustrating. That money?should be coming, but it doesn't actually pay the mortgage until it is in my bank account. This is why my checking account is connected to a personal line of credit, and why, during the summer when my husband doesn't have as much work, we carry a credit card balance.
Smoothing Home Business Cash Flow with Fund Box
One of the cools things that is happening with FreshBooks is that there is now a partnership with a business funding company called Fundbox. The partnership takes outstanding invoices from FreshBooks and?allows you to borrow against them. You have 12 weeks to repay the amount you borrow.?Fundbox lets you know what your fee will be up front, before you decide to go through with it. The biggest drawback to Fundbox is that the fees are quite high. Any “fast money” type loan, and any loan that relies on your invoices like this, is going to come with exorbitant fees. In the case of Fundbox, it is right around $43 for a $1,000 loan.
The whole process is streamlined and easy, since you just link your FreshBooks account. As soon as you issue an invoice, it appears in your Fundbox dashboard as well. You can easily pick which invoices you want to “clear” at each time, and then you receive regular reminders about which invoices you need to make payments on over the course of the next three months. Realize, though, that you will be limited as to a “line of credit,” and only invoices of a certain age will be considered. ?Once you choose to go through with a Fundbox loan, you will be required to enter your bank account and routing information. The funds arrive fairly quickly, and the information you provide is used to automatically begin deducting your weekly payments from your account.
Another thing I like about Fundbox is the fact that there are no prepayment fees, and if you repay your loan early, you will get a refund for a portion of your clearing fee. Basically, your clearing fee is pro-rated if you don't use up the entire 12 weeks to repay your loan.
It's Best to Plan Ahead
The main problem with my home business cash flow has to do with the fact that I have so many automatic payments. Student loan payments, the mortgage payment, automatic transfers to my “quarterly taxes” savings account, retirement account contributions, and the 529 contributions. All of these come out at the same time each month, and most of my money is accounted for each month.
The rolling nature of when I actually receive my money — I get different chunks here and there depending on when each client pays — is at odds with the fixed times that money is deducted from my checking account. While I try to maintain a decent cash cushion, and I have an emergency fund, sometimes it's just easier to rely on these other forms of cash flow management.
You do want to be careful, though. These forms of cash flow management come with a cost. Fundbox charges its clearing fee. Carrying a credit card balance and using a personal line of credit both come with interest costs.
“Real” businesses (corporations) use credit as a regular part of cash flow management, borrowing as needed in order to make payroll and keep things moving smoothly. While you might not want to make it a habit as part of your home business operation, it might not hurt to know your options as a back up plan. I haven't used Fundbox yet to actually get a loan, although I've set up my account, just in case.
Look into the possibilities, and see what you can do moving forward to ease your home business cash flow.