This is the second rhythm of our 8-part rhythm series. You can learn more about rhythms here and get up to speed! Be sure to subscribe to my email list so you’ll be the first to know when the next blog drops each week. If you missed last week’s blog, you can check it out here. We talked all about CEO Time and creating space in your workflow for big-picture planning and vision casting outside of your day-to-day tasks.
It may come across as a bit harsh (I promise to only drop truth bombs with lots of love), but the reality is that unless your business is profitable, it may not be much more than a really expensive, time-consuming hobby.
I don’t say this to serve you negative, doubtful, jaded vibes.
I’m telling you this, straight up, because I wholeheartedly reject the idea that you have to choose between a successful business and a passion-led business. But I DO believe you need to strategically focus on your financial rhythms to maintain the health and viability of your business endeavors and financial success.
Passion without a plan will often end in disappointment.
Don’t leave the financial success of your business to chance or a whim.
There’s a better way.
This week we’re digging into Financial Rhythms in business: a collection of small, medium, and large rhythms you can put in place throughout the year to support your money goals and financial success. Each of these rhythms supports a different aspect of your financial success because there are quite a few factors that contribute to nurturing a successful business.
The good news is when you use this rhythm-based system to manage your finances, you’ll be able to chip away at the often daunting task of managing your money so you can feel confident and in control of the dollar signs (or pounds!) behind your creative business.
The even better news? It doesn’t have to be overwhelming or complicated. It just has to be consistent. By the end of this blog, you’ll be ready to implement your very own custom plan to tend to your finances daily, weekly, monthly, quarterly, and yearly with ease and efficiency.
Do your finances scare you?
You’re likely reading this because you want to improve your financial systems or because you don’t really have any plan in place for your money.
When it comes to the “money talk” in 1:1 coaching sessions, my clients often have similar reactions to facing their fears around finances. Let’s call it the “Fear Factor Effect.”
Do you remember that game show?
You know… the one where contestants had the chance to win up to $100k if they faced their worst fears.
I’d bet that at the start of our work together, most of my clients would have preferred to…
…before they would confront their finances head-on (even if that could ACTUALLY mean earning a bunch of money on the other side, game show or not).
But once I helped them break down their financial needs and put streamlined rhythms in place, they developed a completely new outlook on money.
Rhythms can help YOU heal your relationship with finances too.
If thinking about your finances feels intimidating, unfamiliar, or overwhelming it is totally understandable!
I STILL wish I had learned more about balancing a checkbook than I did about balancing algebraic equations back in high school.
Are you with me?!
:: I see you nodding your head ::
It wasn’t until after college that I looked around and thought,
“Hey! Why did nobody prepare me for THIS stuff?”
I did not take a single math class in college. Legit. NOT ONE…
…ohhh the quirks of art school 😉
So, when I first confronted my business finances, I had to dig deep. I figured it out (sometimes the hard way).
How it started: Me in my tiny NYC apartment trying to keep my eyes peeled open as I scoured through “Finance for Dummies.” I was literally starting at square one!
What happened next… I absorbed anything and everything I could on the job in real-world situations. I quickly learned how to speak the financial lingo, what those crazy terms actually MEANT, and what was necessary to build a business’ financial strategy.
How it’s going… Today I have a BOMB accountant on my team (the real MVP)! And while she helps me navigate my finances confidently, I will forever be grateful to myself for taking the time to learn the basics of personal and business finance (she’s probably grateful too ha!).
You COULD follow the same journey I did.
But I want to help you…
…so you know what will have the most positive impact on your business. You’ll be able to set down the “Finances for Dummies” book once and for all (who am I kidding, I know it’s still collecting dust on your bookshelf).
If I did it, I know without a doubt you can do it too!
So, roll up your sleeves! It’s time to demystify the business finance game once and for all. I’ll make it as painless as possible (even if you consider yourself finance-intolerant, “not a numbers person”, or allergic to numbers).
By using daily, weekly, monthly, quarterly, and annual financial rhythms you are going to be on the pulse of the profits that support your dream business so you can…
On the other side of this really scary “F” word, is a business you love that loves you back!
You might have “finances” on your to-do list as a SHOULD.
You know it’s what you’re supposed to do. But doing something out of obligation is likely why it’s been sitting on the back burner for so long.
When you finally muster up the energy to tackle this looming project you feel overwhelmed, intimidated, or even scared. So it gets swept under the rug for another week, another month, another year.
You hope your profuse apologies will appease your accountant for at least one more year…
I’m here to convince you that tending to your business finances YOURSELF is a MUST. Even if you have a team or pay a bookkeeper or accountant to actually CRUNCH those numbers, it’s YOUR responsibility to know and understand them. While it is great to lean on the pros, you also need to have a trained eye so you can feel confident your team member is reporting on and managing your numbers correctly. Plus, this will ensure that you are able to USE those numbers. You’ll be in tune with the health of your business and feel equipped to make sound, strategic decisions based on REAL numbers and trends!
Let’s light a fire beneath you so you will actually WANT to apply my guidance. My goal is for you to feel empowered and motivated to put effective rhythms in place that support your business’ financial success once and for all.
Let’s dig into the 3 reasons WHY you need to get on a first-name basis with your money.
You might be good at what you do, but without the right financial sense, you could be losing money (even if you take on more clients!). Sounds counter-intuitive, but it’s true!
In art school, my peers were some of the most talented creatives I’ve ever met. They could create incredible pieces of artwork, design, and more. We moved our cap tassels from right to left at graduation, and I was SURE every single one of them would find success following their passions!
I was shocked and dismayed to learn that it didn’t take long for many of them to abandon their dreams and their art.
I was crushed.
This feeling is actually what spurred me to become the business coach for creatives that I am today. I realized these people didn’t give up because they couldn’t hack it. The challenge they were up against was a lack of opportunities, education, resources, and support systems. No one had taught them how to run a successful creative business, despite their creative talents.
My mission is to ensure more creatives can sustainably and profitably build the businesses of their DREAMS because the world is a better place when people can share their passions.
I want you to succeed… but talent, willpower, and Instagram “likes” (aka vanity metrics) are NOT going to offer you the financial success I know you are capable and deserving of!
Financial rhythms are the key.
When you are…
…you will finally be able to move the needle forward in your business so you can focus on being the creative genius you are!
Let me share some numbers with you to inspire you to get up close and personal with your financial numbers…
“According to a U.S. Bank study, a whopping 82% of businesses that failed cited cash flow problems as a factor in their failure.”
There’s a reason they say, “cash is king!” It’s an old business adage that is, quite simply, timeless.
I don’t share this statistic to scare you, but to explain how important finances are. If you think they’re just going to hum along in the background without any work on your part, you’re mistaken.
You can’t just wish, hope, or will your business finances to be in order. You need to create a system, a RHYTHM, that is sustainable, practical, and effective so that you can be the very best CEO possible for yourself, your clients, and your team members.
They may not want to admit it…but I bet they’d agree!
Even the best accountants and bookkeepers need YOU to hold up your end of the bargain as the business owner. That means providing them with updated account information, receipts, invoices, bills, and more! Outsourcing will take SOME of the financial work off your plate (and offer a whole lot of peace of mind), but you still need to be an active participant.
You need to have a basic understanding of your business numbers. It’s your responsibility as CEO and I want to empower you with the knowledge you need now and in the future!
COO Tip: Get a handle on your finances before you hire a financial team member or outsource your books to someone else. It may keep you from spending money on a team member prematurely. If you ARE ready to outsource, you can feel confident that you’re hiring the right person and are asking them to take on the tasks that are going to positively impact your business the most. Rather than outsourcing as a band-aid, it will truly be able to HEAL that aspect of your work so you can stay in your zone of genius.
Think of this as your quick reference guide SLASH financial cheat sheet. Before you map out the financial rhythms that will support your business, I want to offer you a crash course in finance lingo. I literally highlighted my way through the book, “Finance for Dummies” ((well… I made it ¾ of the way)). Let me tell you, it was DENSE… even for a dummy.
Let me translate for ya!
>>I’m like the Babelfish, Rosetta Stone, and Duolingo of Business Finance<<
Yes, these terms can be intimidating. But once you understand what they are, how to use them, and how they can benefit you and your business, you’ll feel tremendously more well-versed and well-prepared to navigate the financial aspect of your business.
Here are the “jargony” things you’ll want to know:
You ALWAYS want to know which one of these terms you are talking about when analyzing numbers. They are often mixed up. (Also – it can be SUPER misleading ((hi bro marketers)) when businesses report their revenue…meaning, I know plenty of 7-figure businesses that are not profitable (or barely profitable) but tout their big revenue number. I equally know a ton of lean businesses that have lower revenue numbers but it’s almost all profit. So…it’s not impossible for a company with a smaller 6-figure revenue number to actually be more profitable than a splashy “7 or 8-figure” business.
Let’s keep it simple.
Revenue is the total amount of income generated BEFORE expenses. For example, a business could earn $100k, but this number doesn’t reflect the expenses like payroll, operating costs, and taxes that allowed the business to achieve that revenue number in the first place.
Profit is the amount of income that REMAINS AFTER taxes, expenses, operating costs, etc. Profit, plain and simple, is what you are actually bringing “home”. That business could have earned $100k in revenue but may be left with $60k in PROFIT when all is said and done.
Cash flow is the money “flowing” into and out of the business (money coming in, money going out). When you have more money coming in than going out over a period of time, you have a positive cash flow. When you have more money going out than coming in during a period, you have a negative cash flow. Businesses can have both, and it can change…but it’s important to know what your CURRENT cash flow is at this moment in time. In addition, it’s even better when you can ALSO see past trends and what your cash flow has looked like over time.
This is a common term that stands for “Profit and Loss Statement.” A profit and loss statement, AKA an income and expense statement, summarizes revenues, costs, and expenses. This is a key tool in UNDERSTANDING your cash flow and what is contributing to it.
A/R stands for “Accounts Receivable.” This is the money due to you and what clients may owe you for services rendered. One of the first things I help my 1:1 coaching clients and Outsourced COO clients do is follow up with any outstanding balances so that they can finally get paid for the work they’ve done. This has to become a rhythm that you tend to often otherwise you’ll constantly feel like you’re chasing down payments (not a good feeling!).
With your financial lingo handy, it’s time to break down the financial rhythms that will help your business flourish!
Finances involve more than one rhythm. I think of these rhythms like a Russian Nesting Doll:
Each of these different rhythms makes up a financially sound business that runs like a well-oiled machine. Taking the time to create these rhythms will put you at ease so that you can feel confident about the money your business has flowing in and out regularly. This is the key to financial success.
The best thing you can do is start by implementing a regular money rhythm. I typically suggest beginning with your weekly rhythms and then deciding if daily rhythms make sense for your unique business needs. Only YOU can decide what is most practical and aligned.
As money comes in and goes out, be sure to log where it came from or where it’s going. A simple spreadsheet is all you need to make a big impact! Doing a little bit along the way will make tax season so much smoother and less effortful. In the future, you may need to consider investing in accounting software, but it’s better to start simple than not at all! In fact- I maintain a simple spreadsheet to help me see my most important numbers (revenue, sales, & profits) at-a-glance without logging into Quickbooks (even though I use Quickbooks to track every last penny).
When you’re ready, I highly recommend bringing a financial expert onto your team. Depending on your accountant or bookkeeper, they may recommend graduating to a more robust accounting software like Quickbooks.
If you have a high volume of orders coming in regularly, it might make sense to track your income daily. If you work mostly with recurring revenue, you may only need to do this once per month. Consider what makes the most sense for YOU! Otherwise, weekly updates should be a strong foundation as you keep up with your general income and expenses.
Did you know that “93% of businesses experience late payments from customers?”
I want you to be part of the 7% instead.
I want to frame this topic with this statement: your clients DON’T NOT want to pay you!!!
Most likely if a client is late on a payment it’s because they’re caught up in the busyness of their own life. We have ALL been there (am I right?!)
The best way to reclaim your accounts receivable is a two-fold process.
First, you will want to tend to outstanding balances with simple reminders. If payments have already fallen behind, put a system in place to get back on track. Follow up on those outstanding invoices! I know it may not be the most fun thing in the world, but you need to hold your clients accountable and get paid the money you are owed.
Failing to follow up on expired invoices can make it challenging to maintain cash flow in your business. Being able to rely on the income you’re expecting is essential for your business to be sustainable.
If you do NOTHING else, do this!
Once you feel caught up, you can put a new weekly rhythm in place to avoid late payments in the future! Be PROACTIVE and get ahead with due date reminders, a rhythm that will help you avoid chasing payments after they’ve already fallen behind (HINT: this can probably be automated!). This is truly an act of service to yourself and an act of customer service to your clients. Make it easy for them to remember to pay you and keep up with their own to-do lists!
COO Tip: In 2021 I worked with one client to put the right A/R systems in place and they recouped $45k+ in late payments AND increased the number of on-time payments for current accounts DRASTICALLY. All it took was a well-thought-out process and a consistent rhythm to get them back on track. This is the true power of A/R systems as a rhythm in your business.
Your monthly and quarterly rhythms will become the backbone of your financial strategy. They serve two main purposes. First, they allow you to be on the pulse of your cash flow throughout the year. Second, they help you target patterns so that you can be more responsive and reflective during your annual financial rhythms.
What are your regular expenses (A.K.A. the money going OUT of your business)? This might include subscriptions, your lease, utilities, and even payroll! Typically these will follow a monthly or quarterly pattern. Consider scheduling your recurring payments if possible. Ideally, you can schedule these after you receive any regular income from retainer clients or autopay accounts.
Consider how you want to receive payments from clients or customers (A.K.A. the money coming INTO your business). In advance, monthly, on retainer, a la carte? This will help you plan for your expenses and will help you anticipate income each month to pay yourself (keep reading below because this is SUPER important), your team members, and your expenses. Understanding how you receive income is a major factor in your cash flow.
It may seem simple, but it’s often forgotten or dismissed. As a business owner, you have responsibilities to your clients, vendors, contractors, and team members. You also have responsibilities to yourself and your family. Be sure to pay yourself FIRST! You need (and deserve) to be profitable too! You cannot continue to work for free. Pro bono work for yourself simply doesn’t add up!
Reconciling your books is an essential monthly rhythm. When you reconcile your books you make sure that the internal records you’ve kept up with match external records from places like your bank statements or credit card statements. It’s a “check and balance” that helps to make sure everything is in order and nothing’s been overlooked due to human error.
Unfortunately, for many of us, tax season doesn’t come around just once a year. Lots of freelancers and small businesses (myself included) are required to pay quarterly taxes! This is important to know and stay on top of. Your accountant can help make sure you are paying the right amount, to the right people, on time. This prevents you from getting hit with any late fees or penalties.
I highly suggest you hire an accountant. It’s a full-time job for a reason! There are so many ins and outs of your business financials. With an accountant on your team, you’ll have better peace of mind (and probably more money in your pocket). Take time to find an accountant you trust and can work with early on as they will help you evolve and grow. Meet with your accountant quarterly to set and review your tax strategy and the financial success of your business. A good accountant is worth their weight in gold, meaning that your investment offers a huge ROI (return on investment). They’ll pay for themselves and then some in the form of savings and avoiding unnecessary fees.
COO Tip: I recommend ALL small business owners work with an accountant who specializes in small businesses AND in your state/local regulations. Bonus if the account also specializes in your industry or business structure!
Tending to these monthly or quarterly rhythms will ensure your business finances are in tip-top shape. Consistently tune in with these aspects of your finances, and you’ll build an agile business that can thrive under your watch.
Finally, you will tend to your annual rhythms. Most people already have some sort of annual financial rhythm out of necessity. You need to file your taxes, and so this is essentially built-in.
We all have rhythms, whether we know it or not! Rhythms aren’t intrinsically beneficial. Unintentional rhythms can cause more harm than good.
If you don’t have solid finance rhythms in place throughout the year, annual financial rhythms probably feel daunting, challenging, and maybe even IMPOSSIBLE.
In one fell swoop, you’re attempting to capture all of your financial data from the entire YEAR at once. Even the most skilled accountant would have trouble with this!!!
Instead, tending to your quarterly, monthly, weekly, and even daily rhythms will lighten your load when it comes to annual rhythms. You’ll have less to do and you’ll gain more insightful information to guide your plans, actions, and goals.
Let’s take a look at what you should prioritize when focusing on your finances each year.
Each year, I recommend you consider if your current pricing model is still sustainable for you and your business. It can take some time to shed that imposter syndrome and truly charge what you’re worth! As you develop your skills, gain experience, and deepen your industry knowledge your pricing should evolve to match your expertise.
If possible for your business, look into ways to move away from exchanging time for money. If you are a service provider, for example, you may explore charging for the deliverable instead of at an hourly rate. Being efficient and doing something quickly but WELL shouldn’t cost less than taking more time to do the exact same work (or lower quality work). Don’t penalize yourself for being good at what you do!
While it’s not ideal to change your pricing often (as this diminishes trust and reliability), it IS something you should look at carefully once a year. If you plan to increase your prices, be sure to notify your current clients early so that they are aware and can plan financially on their end.
This is tough (read: impossible) to do if you aren’t tracking and reflecting on your finances throughout the year. Since you will have your daily, weekly, monthly, and/or quarterly rhythms in place (based on your unique business needs and what makes sense for YOU), this will be a breeze! Trends can help you…
You should already be doing this monthly, but your year-end books are essential as you prepare for tax season! Set yourself up for success and less stress by closing out your books at the end of the fiscal year and making sure your internal and external books match up!
Over time, you can reflect on all of your important financial goals. Revenue and profit are the two biggest pieces of information you’ll want to review.
You’ll understand your annual income and have the opportunity to reflect and act on any patterns you notice. Building this in as an annual rhythm is smart to do ahead of tax season (hello, stress reduction!).
BUT I’d argue the best time to reflect on your finances is ahead of your annual business planning. These numbers will allow you to visualize and strategize your business AND how you’re going to get there in the next year and beyond.
Now that you know WHAT rhythms you need, let’s explore HOW to put these rhythms into action!
There is no such thing as a “one-size-fits-all” plan for your financial rhythms, but there are some tried and true rhythms that just make sense! Here’s some advice to help you choose the right rhythms.
I love time blocking. It’s a strategy I use in so many aspects of my business (and personal time for that matter) to reserve time for the things I value most. This is a dedicated time you mark on your calendar repeatedly to hold you accountable. Treat it as a non-negotiable. Time blocking helps you get out of your own way. Instead of relying on willpower, you are quite literally creating the time for the things that matter to you and your work.
This time-blocking practice will help you feel confident that you won’t forget or overlook certain tasks that are essential to your overall financial rhythms.
Remember CEO Time from our last blog post? (If not, you can check it out here.) Use CEO time at any interval you choose (weekly, monthly, annually, etc.) to dedicate time to big-picture financial planning or to fine-tune your regular financial rhythms. As you establish your CEO Time, communicate it to team members to ensure you’re not interrupted. This will set you up for success. Treat it like any other appointment or meeting, AKA if you wouldn’t bail on a client at the last minute, don’t bail on yourself either!
You may not be financially ready to invest in software like Quickbooks. But that doesn’t mean you should put off managing your numbers altogether! Get started where you are with the resources you have. Google Sheets or Excel is a perfect spot to document your finances. You can create a master sheet to track each aspect of your financial rhythms such as revenue, expenses, profit, and more. This can be imported into a software platform in the future and is easy to share with team members, your accountant, or your bookkeeper as needed.
Don’t leave the financial health of your business to chance. With regular rhythms, you’ll be able to build your confidence, and break once overwhelming money tasks into manageable, dare I say “easy”, & digestible pieces. These small, medium, and large rhythms will work together behind the scenes to help you take aligned action in your business that supports your past, current, and future financial state. You will thank yourself for putting these essential rhythms in place (and trust me, your accountant will too)!
I am so excited to help you put rhythms in place for your business this year. I encourage you to…
With the right rhythms in place, your business will be humming along in the new year creating space, systems, and strategy that will help you to actively work towards, meet, and even exceed all the goals, resolutions, and dreams you have in mind for the year ahead!
Share this to Pinterest so you have it handy anytime you need a refresher!