Modern Mompreneur: How to Manage That Cash Flow, Baby!

I’ve got a confession to make: I don’t like numbers. It’s not that I’m not good with numbers, I just find dealing with numbers, especially business numbers, to be tedious. And I never really understood what “cash flow” was all about. I thought, “Money comes in, money goes out”, what’s the big deal?

Well, for the first few years of my business it was okay to have my head just a bit under the sand, but this way of thinking won’t work anymore. I’m making big strides in growing my business this year, and that means making investments in marketing, including direct mail campaigns. It occurred to me recently that I have to be more aware of when and how much money is coming into my business so I can pay for my marketing.
Then it dawned on me: That’s what cash flow is all about.

To get my cash flow act together, I sought help from attorney and certified financial planner Elizabeth Potts Weinstein. She’s the author of Grow Up! Strategies: The 7 Legal & Financial Strategies You Need to Up-Level Your Small Business, and host of “The Wealth Spa Radio Show.” (She’s also, like me, the mother of a 3-year-old.) Elizabeth says that the “number one concern of small business owners is managing the ups and downs in business income each month. You may have the most brilliant idea or the best method of helping your clients, but if you run out of money tomorrow, you are doomed.”

Of course we don’t have to be doomed! Here’s an overview of Elizabeth’s simple program for staying on top of your money.

Automate Everything

The first step Elizabeth recommends is automating everything in your business finances. That includes:

– Assigning an assistant or some other helper to properly organize your paperwork and receipts on a monthly or quarterly basis. This will make tax time a lot easier!

– Use software such as Quicken or QuickBooks to track your accounts. (You can also set up the software to receive auto-downloads of your bank statements).

– Outsource your bookkeeping to a bookkeeper or assistant as soon as you can.

– Use the auto bill pay feature in your bank account for regular bills.

When I learned this step I realized I’ve been “half-automated”. While I use QuickBooks, I use none of its automation functions. I pay some bills automatically, while writing checks for others. I have an assistant, but no bookkeeper. I did my own taxes this year, but the whole process will be a lot easier next year if I complete the automation process. I’m working on this now.

Review Reports Regularly

I must admit that in the past, tax time has been the only time I reviewed my business’s financial information. (We review our family finances monthly,
however.) Every tax year I have vowed to change that, but really had no structure that would keep me accountable.

Elizabeth suggests scheduling “Money Meetings,”
specific time slots devoted to creating and reviewing financial reports. “You must create a system for checking on your finances each week, month, and quarter to make sure that you did what you thought you were going to do, and to make changes for the future,”
she says.

She suggests you do this by creating weekly reports of your income and expenses in addition to the following statistics:

– Visitors to your website

– New subscribers to your newsletter or blog

– Purchases

– New clients signed

– Introductory appointments made

– Conversion rates

“If things are down one week, you can immediately ramp up your marketing to make up for the lull,”
Elizabeth says. “That way, you won’t be surprised in 6 weeks when your income goes down because you had let your marketing slide one month earlier.”

Predict the Future with Cash Flow Projections

Next, and this will be my biggest challenge, is creating a Cash Flow Projection. It’s a chart where you make educated guesses on what your business expenses and income will be month-to-month. That’s a scary thought especially when, as Elizabeth says, “You may find that even in the best case scenario, your business is not going to make enough money. Perhaps your expenses are too high, you don’t have enough funding, or your prices are too low.” The upside, though, is that knowing this information can help me to be proactive. I can make decisions to cut expenses, launch a new program or increase my marketing when necessary.

According to Elizabeth, “You should also be reviewing cash flow projections on a weekly basis so you’ll be able to see which expenses will be coming out in upcoming months, so you don’t accidentally think you have extra money one month (and spend that
money) when your have a big insurance payment due in the next 2 weeks.”

Creating this projection also helps me see exactly how my business works and where my money is coming from. I can see if 80 percent of my business is coming from 20 percent of my subscriber base and focus accordingly. I can also set goals for myself. For instance, I have a goal of acquiring a certain number of new publishing clients a month and enrolling a certain number of students in my new book program. If I meet those goals, my cash flow projections will be fair for the rest of the year.

These three areas should be enough to get you started, but if you’d like to know more, just go to Elizabeth’s site, http://growupstrategies.com to get a free special report on how to take control of cash flow in just 15 minutes per week. All right, I’m ready. I know I can do this. And you can too!
Calculators ready? Get set. Now go with the flow!

Sophfronia Scott is executive editor of The Done For You Writing & Publishing Company. After 15 years at Time Inc., she left the corporate world to start her own business helping aspiring authors to write and publish their first books. You can learn more about her work at www.TheBookSistah.com.
Have a question for Sophronia? Email her at mompreneur@modernmom.com