3 Big Ways To Avoid Scraping The Bottom of the Cash Barrel
You probably chose to start an interior design business without first assembling an accountant or bookkeeper, but there comes a time when you must create and maintain interior design financial statements. The alternative is a finance guessing game that sees you scrambling to avoid reaching bottom over and over again because you do not have a realistic picture of your money.
More Than Just A Picture
This picture certainly helps you understand the in-and-out flow of cash, but you then must use this information. There are 3 cash flow actions you must take in addition to just watching the flow.
To accomplish financial health, you must….
…have excess cash in the bank account. At all times, you want to have a cushion of cash in the bank. In the worst situation to find yourself, you have every cent dedicated to some purpose, and then unforeseen events happen—that reliable client suddenly can’t make a payment. You must be able to float until that payment arrives.
You also don’t want to miss out on investment opportunities. The way to make money isn’t just by earning but also through investing—your money should make you moremoney. But this isn’t gambling—don’t pull money you need to cover expenses and invest that; you need undedicated funds that you can put toward investing.
Finally, excess cash means you can correct mistakes. Accounting and bookkeeping mistakes are bound to happen. In fact, that’s the very reason to conduct periodic reviews—you expect mistakes, discover them, and adjust. Excess funds allow those adjustments.
…know how much cash you need. Each month, you’ll have expenses. Most of these are regular bills, so you can figure out the amount of cash to dedicate to these each month. Once you know the amounts of all payments, this number is your benchmark—you will need to reach this amount each month to cover expenses. Now, you can plan. How will you bring this money into the business to consistently make sure you have the cash to cover all outstanding bills?
…know what is due and when. Devote time to planning for purchases so that you know when these will occur. If you know that you need to replace your equipment or want to join a coaching seminar, be aware of those due dates. For example, every April is tax season (and even earlier in March for some of us). So, make sure to have the cash set aside to cover the cost of purchases, training, taxes, etc.
Easier Said Than Done
It’s true, this is all good in theory, but the practice is much trickier. Luckily, you don’t have to reinvent the wheel—these are all steps countless successful business owners have done throughout time, and there are resources.
As an interior design profit coach, I am a conduit for this knowledge to pass along to you. You can also join The Designers’ Inner Circle and learn how other successful business owners created their interior design financial statements—and see real examples!
It doesn’t have to be a mystery, and it shouldn’t; don’t wait until you’re scraping the bottom of the barrel again to get yourself in position to manage your cash flow.
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