I’m in one now. Fortunately, I knew it was coming because historically, I am slow in January and I have gotten used to it. It’s part of being self-unemployed.
There are a handful of ways to get on the fast track to a failed business and not managing your cash flow is one of them. You have to know what your cost of doing business is (CODB), what is owed to you (accounts receivable) and what you owe (accounts payable) at all times or you may find yourself coming up short at the end of the month. It sounds like standard budgeting like you might do for your home, but it is more important because we work for ourselves and pay ourselves from this income. We can’t pay ourselves if our businesses are not healthy.
There is a nice CODB calculator on the NPPA website that you can use to see what you have to make given your expenses and overhead. It is eye opening when you write down all your expenses (and don’t forget to include what you want as a salary) and figure out what you have to make every business day.
Once you come up with a plan for managing your cash flow, be sure to pay yourself regularly even if it is a small amount. Force yourself to pay your talent (you) with regularity like an actual employee would expect to be paid. Then if you can, bonus yourself more money as needed!
No cash was harmed in the making of this image...
