One thing many seasoned freelancers credit for their financial success is the idea of a client audit. The notion is simple: you periodically look at your freelance client roster to decide who stays and who goes.
Yes, you read that correctly. A client audit helps you determine which clients to let go of. You may be thinking, “Why on earth would I let go of a paying client?” and the reason is because they may not actually be worth it depending on how much time the work takes versus how much they are paying you. So, in actuality, you may actually be losing the opportunity to make more money and waste less time. The only way to truly determine this strategically is to conduct a client audit.
If you’ve never tried to conduct a client audit before, here’s what you need to know.
Determine how often you conduct a client audit.
The first step in conducting a client audit is to determine how often you’re going to do it. Some freelancers do it once a quarter while others do it every month. It’s really up to you and what you feel makes the most sense.
I tend to do one every quarter because I’m already looking at finances for my estimated tax payments. Two birds one stone.
Track your time.
If you’re going to conduct a client audit periodically, it’s very important that you begin tracking your time. You need to know how much time a project is taking you so that it can help you determine whether or not it’s a) worth it and b) paying you enough money.
Fortunately, time tracking is easier than ever. It’s actually one of the features offered by Due. Simply log into your account when you’re about to start a project, start the timer and take note of which client you’re working for. In this case, you’ll want to also take into account meetings and administrative time, not just the actual time you spend writing, designing or using whatever service you provide.
Do the math.
Each time you sit down to your client audit you can pull up your time tracking report and take a look at an overview of where you are spending your time. Then what you do is go down the list of clients and one by one take how much money you made versus how much time it took you to complete a project. This will show you how much you’re making per hour for each client.
At this point, you can see who is worth the time and who isn’t. Even if two clients are technically paying you the same rate, if one is taken a lot more time then you are actually making less money with them. From here you can do two things. You can raise your per project rate or you can let them go.
If you want a more detailed explanation of how to conduct a client audit, check out Michelle Nickolaisen’s video tutorial.
Freelancers of all kinds should learn how to conduct a client audit so they can look for any potential profit leaks. It’s just one of the many ways you can use strategy to build a profitable business.