Cash Flow for Independent Contractors: Don’t Price Yourself Out

Since 2002, Shari Easton of Tulsa Oklahoma has been installing and repairing tilework across the Midwest. Working under the business name of Masterful Tile Creation, Shari has spent nearly two decades providing high-quality service, designs, and installation services.

Shari recently shared the behind-the-scenes operations of her business, namely how she finances and bills her projects, and how that affects her cash flow.

As a specialty independent contractor, ensuring positive cash flow is a combination of solid pricing, simple accounting, investing in tools, and building her reputation.

Pricing: Don’t cut yourself short

When you work in tile installation or any other building-related work, you often have to balance client requirements, the costs of quality materials, and labor costs to meet the client’s budget. However, you don’t want to cut corners by providing low-quality tiles, grout, and other materials. You also don’t want to undercharge for your labor, since it can take weeks to finish a project.

Remember, as a self-employed individual, you don’t have a 401(k), employer-sponsored healthcare plan, or any other traditional benefit. And you pay taxes on whatever you make, so you need to keep those expenses in mind.

If you cut corners on materials or try to undercut the competition, you risk pricing yourself out of the business altogether.

You’ll also want to put solid billing procedures in place. After providing an estimate, Shari requires clients to purchase the materials at the beginning of the project. This ensures that she doesn’t have to worry about inventory or negative cash flow at the start of every new job. She also takes an advance of 25% of labor costs.

By ensuring she has some of the labor cost up-front, Shari gives herself some financial padding in case she needs to purchase new tools and for other expenses — like driving to and from the worksite and general living expenses.

Simplify your accounting

While Shari mentioned looking for alternative ways to keep accounting straight, for years she used templates made on Microsoft Word and printed out for invoicing and keeping track of her finances.

The best program is one that you know how to use and keep track of. Some popular programs for basic invoicing and accounting include Wave App, Freshbooks, and Quickbooks.

Zero budget marketing

Perhaps one of the biggest contributors to Shari’s success and her ability to keep her cash flow management simple is her stellar reputation. Her business runs almost exclusively on referrals from tile shops, suppliers, and former clients. Until now, her only marketing expense has been providing business cards.

However, she’s working hard to grow her online presence as well, first through cost-effective methods like networking on Facebook and local small business groups. Shari’s also working on a website, which will add some smaller recurring costs, such as hosting.

Through investing in her expertise and community, Shari has been able to keep her marketing budget to the bare minimum—thus simplifying her accounting and reserving cash flow for other recurring costs, such as travel expenses and new tools.

Take your business to the next level

No matter how big or small your business is, understanding your cash flow is critical if you want to make it out of the feast or famine cycle. Cash flow projections, detailed reports, and simple visualization are a great supplement to your current accounting system. Try Pulse for 30 days for free and take control of your business finances.