5 Tips For Artists On How to Manage Cash Flow So They Can Be More Profitable
Guest post by Cathy Dillon
All business owners have those few numbers they gravitate towards. Maybe they like watching their sales go up or they find themselves driven to grow their email list. One measurement that can frustrate a lot of art business owners is cash flow.
Cash flow is the net amount of cash that comes in and out of a business. It may sound like a simple problem to manage if you are always in the green but failing to plan can create bigger challenges down the road. If you are looking to develop an emergency savings or have a large bill coming up, your cash flow can be quickly thrown out of whack.
Managing cash flow can be an especially big issue for artists who are preparing for a busy season. How much cash should you spend on inventory and art supplies to ensure you are not in the red? Simultaneously, how do you not overspend on inventory or sell out too early?
The following tips can help you as an artist manage your cash flow. These will help you always be in control of your finances.
Develop A Cash Flow Plan
Your cash flow will never be managed well if you are always in the negative. Take the time to understand your monthly expenses and see if your monthly income covers those costs. If the answer is no, this is the first challenge you should address.
What expenses can you cut?
Is there a way to increase your revenue or charge more for your art and products?
What are the margins for similar creative businesses in your industry?
Ask yourself a few of these questions to develop an understanding of how to move forward.
Create An Emergency Savings Account
Create an emergency savings account, set a goal, and make sure you consistently have that set number in your savings account. For a goal, we generally recommend 3 months’ worth of expenses. If your savings account dips below that threshold, make it a priority to bring it back into balance.
Invoice & Collect Accounts Receivables
You did not start your art business to learn bookkeeping or how to manage Shopify. Yet as business owners, it is often something we find ourselves doing constantly. Unfortunately, it is a necessity for good cash flow.
Be sure to keep accurate records on when customers need to be invoiced and payments collected. Regularly, you should be checking your aged receivables to see what invoices have gone unpaid.
If you notice late payments is a recurring issue, it may be time to bring in another set of hands. Boost Business Services offers services that can help ensure your late invoices are not left going unchecked.
Establish Partial Payment Schedules on Long-term Contracts
If you are working to supply artwork or products to a customer on a long-term basis, consider setting up a payment schedule that is reasonable for both you and your customer. Not only will this guarantee you have cash coming in regularly, but you can also ensure you have adequate cash to create the products on an ongoing basis.
Avoid Paying Bills Early
If there is no incentive to pay a bill early, then there is nothing wrong with waiting until the due date to submit payment. This can buy you a bit of time if the cash you have on hand is currently needed for other projects. If you are concerned about forgetting to pay a bill, your bookkeeper can set you up with reminders on when these need to be paid.
Now that you have a few tools under your belt, you are ready to begin managing your cash flow. This can be tricky for any business but especially for those in the arts. Oftentimes finances are required to create the products upfront and then there are busy seasons that can make predictability a challenge.
If you are struggling to manage your cash flow, consider consulting with a bookkeeper. We are experienced in helping artists manage their cash from low to peak seasons.
Cathy Dillon is the owner of Boost Business Services. As an avid knitter and fan of all things creative, she has structured her virtual bookkeeping business to work directly with artists and creatives. It is her mission to help artists gain control of their finances so they can be profitable. Contact Cathy for a free consultation at cathy.boostbusiness@gmail.com. Download her Free Inventory Management Workbook and End of Year Checklist. You can connect with her on Facebook and Instagram.
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