Year-end planning season is approaching, and business leaders worldwide will gather to evaluate performance. Teams will analyze whether objectives were achieved, establish new revenue benchmarks, and celebrate wins or scrutinize shortfalls. After these sessions wrap up, most executives feel satisfied they’ve done their due diligence before the holiday break. Solo entrepreneurs and freelancers engage in similar year-end assessments.

However, this common approach overlooks a critical profit-building opportunity. By concentrating exclusively on revenue generation, businesses ignore the silent profit-killers embedded in their operations. Let me reveal this overlooked aspect of your finances and explain how you can boost profitability without the exhausting hunt for additional clients.

Your Profit-Building Strategy: Annual Expense Audits

Small businesses and solopreneurs unlock real profitability by slashing costs alongside revenue growth. Yes, pursuing new clients and expanding income streams remains essential—I’m not suggesting you abandon those efforts. But sales outcomes often depend on factors beyond your control. You can execute flawlessly and still face rejection. Expenses, however, respond directly to your decisions.

Costs accumulate with shocking speed. I once chatted with a freelance editor who mentioned her coaching membership. This caught me off guard—I belonged to that same program and had never encountered her at the weekly sessions! She’d been paying for the program without participating. When I pointed out the hefty price tag, she dismissed it. Ironically, she’d complained all year about razor-thin margins. Simply canceling that unused coaching program would have immediately fattened her bottom line!

Identify Your Recurring Costs

Reducing repeat expenses starts with thorough analysis. Access your bookkeeping software, financial spreadsheet, or tracking system of choice. Document every expense that repeats on a schedule:

• Internet service
• Phone plans
• Insurance premiums
• Software subscriptions
• Stock photography memberships
• Bank charges
• Domain renewals
• Web hosting
• WordPress plugin subscriptions
• Auto-renewal services
• Coaching or mastermind groups
• Association memberships
• Professional fees for accounting or legal services

Annual charges slip through the cracks easily. I review my bank records and credit card statements line by line, cross-referencing them against my master list to catch anything missing.

My tracking method uses a spreadsheet split into two categories:

1. Expenses that bill monthly
2. Expenses that bill annually

Column one shows which month the payment appears on my statement. Column two identifies how the vendor name displays on my card. Column three explains what I’m paying for. Column four captures the dollar amount.

Once I’ve entered everything in both sections, I calculate subtotals. I multiply monthly costs by twelve for an annual equivalent, then combine both subtotals for my grand total. Spreadsheet formulas simplify testing different scenarios to identify savings opportunities.

Here’s where things get interesting. Scrutinize your complete list of recurring payments.

Consider these questions:

• Does my business truly require this expense?
• Am I actively utilizing this software? Could I switch to a cheaper or free alternative?
• Have I discovered any forgotten charges or hidden fees? Are they essential?

Eliminating dormant subscriptions, substituting budget-friendly alternatives, and trimming excess costs elevates your net profit regardless of sales performance.

Evaluate Returns on Business Spending

Your expense audit may reveal surprising discoveries. Certain expenditures might appear beneficial at first glance, but calculating their actual return on investment tells a different story.

Websites and blogs illustrate this perfectly. I maintain multiple online properties. Two directly support my primary business model, functioning as marketing investments. A third generates modest revenue that covers its operating costs plus a small surplus. The fourth, though, was hemorrhaging money.

Several years back, I created a niche website exploring an industry I’d always wanted to enter. I invested substantially in content development, compensating freelance writers, securing the domain and hosting, and purchasing an attractive premium theme.

I maintained the site through annual hosting and domain renewals. But analyzing the maintenance costs against the income it produced revealed a problem.

The site neither aligned with my current business focus nor generated sufficient returns. Shutting it down became the obvious choice.

Without performing this expense analysis during my year-end review, I’d have likely overlooked these costs for another twelve months—continuing to fund a project that couldn’t justify its expenses.

Your Action Plan: Strengthen Profits Through Expense Reduction

Freelancers, solopreneurs, and small business owners pour tremendous passion into their offerings. This enthusiasm sparks innovation and diversification, but expansion inevitably brings additional costs. Without regular expense monitoring, profitability erodes. Individual charges might seem insignificant, hardly worth attention, yet these small amounts compound rapidly. Conducting a thorough year-end expense review alongside your standard annual assessment, then eliminating unnecessary costs, directly increases your net profit.

Do you struggle with cash flow issues in your freelance writing business? Many freelancers feel like cash is always flowing out and rarely flowing in! If this describes your freelance business, then you may want to read my latest article on Medium: Budgeting Basics for Freelancers – The Cold Hard Truth About Cash Flow. 

I have been a freelance writer, editor, and content marketing consultant for over 15 years. To celebrate my content marketing agency‘s 15th anniversary, I have put together a series of lessons learned and advice for freelancers. This is article 12 in the series. You can read the series in order or simply choose a starting point that interests you. The articles stand alone but you’ll definitely receive more benefits from reading all of them.

Now, on to cash flow…

Cash flow refers to the flow of money into and out of your business. Cash flows in when you receive payments: a royalty check, payment for an article published, payment for a client invoice. Cash flows out when you pay bills: your health insurance premiums, internet expenses, office supplies.

The Rollercoaster Cash Flow Effect

Freelancers often suffer from what I’ve dubbed the rollercoaster syndrome. Their income, when charted on a line graph, resembles the peaks and valleys of a theme park roller coaster. The peaks represent times when they receive a large payment or have a significant client rosters of well-paying customers (feast). The valleys represent times when work dries up or they are between clients or engagements (famine).

Nearly every freelancer, at some point in their career, faces the rollercoaster syndrome. The trick is to smooth out the peaks and valleys to have either a steady chart or a rising line on the graph. To do this, you need to build a business around core retainer clients (anchor clients), large recurring clients, and one-off projects, or a similar model. Indie authors may build a business around core income-producing products (a romance novel series, a mystery novel series), large single projects (a single romance novel, a single title) and passion projects or one-of projects (hosting a writer’s workshop, teaching a class, editing other author’s manuscripts). The idea is the same regardless of how it works out in your unique business.

What’s Your Net Profit?

Few freelancers consider their net profit. Most think only in terms of the gross profit, or the total amount of money billed or received in a particular time period.

However, that number is misleading.  Net profit provides you with a better indication of your business’ health.

Net profit = gross profit – expenses

Simply take the gross profit number, subtract the total expenses for an equal time period, and the resulting figure is your net profit.

Cash Flow and Net Profits Are Not the Same

Think of cash flow and net profits like verbs. Cash flow is active, while net profits is passive. In other words, cash flows, like water in a river, while net profit is still, like a pond. Yes, net profit changes, but cash flow is often called the lifeblood of a business, because money must be constantly flowing into and out of a company to build health.

Cash flow often stagnates for several reasons:

1. Lack of business – you can’t bill for what you’re not doing! If you aren’t getting enough new clients or repeat business, it’s time to focus on the basics of client attraction, retention, and loyalty – in other words, branding and marketing.
2. Late billing – you aren’t billing your clients on time. Decide when you’ll bill clients and then follow through consistently on your billing practices. Do you require a percent downpayment on a large project and bill at milestones or installments? My own billing practice is to bill for work after it is complete and accepted by the client. Retainer clients are billed on the first of the month for the work from the preceding month (i.e., I bill on June 1 for services rendered for May 1- 31).  It doesn’t matter whether you bill weekly, monthly, or quarterly, just be consistent and on time sending out invoices to clients.
3. Late payment – are your clients paying you later and later each month? You must follow up with them. Start off gently. After all, things happen. I have one client whose CEO must sign off on all contractor invoices, but he travels frequently for business, and when he travels, payments can be late. Reminders to their accounting department help. Set up reminders in your calendar or however you manage your business billing to follow up on unpaid invoices.

 

For more tips on managing cash flow, and creating a thriving freelance practice, do check out my article series. I’m on article 12 of 15 and many freelancers have commented on how helpful the series has been. It’s not the usual stuff to help you set up and run your business, but insights into the odd nooks and crannies of the freelancing life that few think of when starting their business.

Read: Budgeting Basics for Freelancers – The Cold Hard Truth About Cash Flow.