Thursday, May 27, 2010

Cash Flow, Baby!

If you are using software like Quickbooks to track the finances AND you are keeping it up to date with the transactions in your business, then I'm sure you've utilized the reports to help you with this.  If not, I hope you are using something similar or at the very least, some sort of spreadsheet to track the flow of money in your business.

The reports from accounting software programs can be a little intimidating for some.  And if you aren't using software, you still need something to help you "see" the money in your business.  A cash flow statement or worksheet is a little more simplified, and useful.  This might make some of you cringe but stay with me...this is important. I'll make it REALLY simple so it doesn't overwhelm you...

Let's say it's your very first month in business. YAY! Congrats!

You've contributed $500 to your business for Contributed Capital; You've closed your first two brides for full service planning packages with deposits at $2,500 each (you're on a roll, girl!); which brings your Sales/Svcs Income to $5,000 for the month. Bride #1 will pay her balance in May and Bride #2 will pay her balance in June.

Now let's talk expenses. Your normal monthly expenses consist of $500 in salaries, $500 in other operation expenses and $100 in tax payments, bringing your normal, customary expenses to $1,100 per month. In addition, in the month of January, you decided to attend an educational conference in April but you've paid for it in advance. The conference fee is $500 and you've estimated other expenses for the conference to run you about $300.

Take a look at your cash flow statement:

January, February and March look good with regard to cash flow, but look what happens in April IF you don't generate anymore sales. You'll run out of money. Even if you decide to forgo the $300 you've allocated for conference spending in April, you will still be short by $300. The next time you will see an influx of money is in May when Bride #1 pays her balance.  (Provided she pays ON TIME!)

In the beginning it's easy to want to spend money on all the nice "shiny objects" that grab your attention. Having this simple spreadsheet setup to show all the cash flowing in and out of your business will help you manage your cash so that you can make informed spending decisions in your business.

Still overwhelmed?  Call or email me so I can help.  Because if you are not paying attention to this part of your business, then you are setting yourself up to fail.  And I want you to succeed!

Until next time...

Aspire to Plan!


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