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Guest Blog: Chris Measures, Managing Your Finances - Why You Can't Be Too Creative
Managing your finances – Why you can’t be too creative.
When it comes to running your own business, one of the drawbacks for many creatives is the need to get involved in the financial side of operations. Most of us would much rather be doing something productive and for many people it is way outside their comfort zone. I must admit to a secret liking for spreadsheets, but I’m probably in a minority!
So, here are the top five things that I’d advise anyone setting up or running a creative business to focus on, when it comes to finance:
1. Get a good accountant
A good accountant is worth his or her weight in gold. But make sure you employ one that fits your size of business and understands the creative sector. They can then provide really valuable advice, as well as taking some of the load off you. For financial admin, think about subcontracting basic book-keeping (totting up expenses, paying suppliers). This doesn’t have to be with your accountant, but find someone that can manage it with you overseeing activities.
2. Invoice as soon as you can
It still amazes me that many creative businesses don’t invoice until weeks or months after the job has been completed. Invoices can be easily created in Word and tracked in Excel, so you don’t need high powered accountancy software to manage this process. Within reason the quicker you invoice, the quicker you get paid. And with cashflow one of the biggest killers of small businesses staying on top of your invoicing is vital.
3. Put contracts in place
Make sure you have contracts with your customers for each project. Stress to them that this protects them as much as you, as it keeps their IP confidential. Document any changes to specs and costs in writing, so you have an audit trail of evidence if you ever need to prove anything. And make sure you detail your payment terms in the contract – if it is a large project try and get a percentage paid up front, with the remainder arriving in staged payments as the work unfolds.
4. Manage your costs
It may be tedious, but if you don’t keep a lid on spending, you’ll end up losing money on running your business. Keep a track of external costs, such as phone and utilities and change supplier when you can get a better deal. You don’t need to go to the ends of the earth to buy cheaper pencils, but at least know how much you’ve spent on stationery, and if that is going up or down!
5. Track your VAT and Corporation Tax
It is easy to get a skewed picture of your business finances as many big bills such as Corporation Tax and VAT go out on either an annual or quarterly basis. And in the case of Corporation Tax you actually pay it well after your year end. So your bank account may appear healthy but actually the money is all due to the government at some point. Therefore do track how much you owe and put the money aside so that you don’t have to scrabble around trying to find thousands at short notice.
With a good accountant and some simple spreadsheets managing the finances of your creative business shouldn’t be too onerous – leaving you free to working with clients, safe in the knowledge that you aren’t going to get any nasty surprises.
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