Do you remember the lyrics of a childhood song, “There’s a hole in the bucket, dear Liza, dear Liza”? I don’t know if kids still sing this today or not. In the 1950s and 1970s, a British comedic duo, Flanders and Swann, wrote a parody named “There’s a Hole in My Budget.” Well, for some of us that hole is all too real.
Last week I was working on a new webinar titled “5 Smart Ways to Make Money in Your Creative Arts Business Now.” While you definitely want to bring more money into your business, you may have holes in your business where money is just leaking out. Bringing in more cash does not negate what you are losing.
To get started, you will need to actually look at your numbers. Yes, I know that it is not as much fun as creating, but you can’t find the leaks otherwise. So block time in your calendar to do this. When you are ready, get out your bank statements, your credit card statements, and your PayPal statements for the last few months. If you want to get even more in depth, go back and pull the annual statements you get from your credit card company or look at last year’s bank statements. Here are some things to look for:
- Are you paying for software or programs that you are no longer using? For example, did you switch to Mail Chimp for your email newsletter, but you forgot to cancel your Constant Contact account? Or did you get an Adobe Creative Cloud membership for a couple of projects, only you are no longer using it? You may not even remember some of what you purchased if you don’t look at your statements.
- Are you up-to-date with your accounts receivable? Once your clients, vendors, shops or galleries have established credit, you will likely bill them on an as-needed basis. If you are the one who actually does the billing, you need to maintain good records of how much money these customers owe you. Also, you will need a system to track the billing and follow-up. Be proactive with billing. If possible, set up an automatic system to bill and charge them at the same time. I believe that you teach your customers how to treat you. So if you are lax about billing them, they will be lax about paying you.
- Do you have duplicate services that you are paying for? For example, do you have a paid teleseminar system and an audio recording service? Can one do the trick for you? Do you need your landline if you only use your cell phone?
- Has your business changed and you don’t need some of the annual services you purchased? Since the billing is not on a frequent basis, you may not even realize you are paying for it. If you no longer need something, contact the vendor and see if you can get a pro-rata cancellation or put the charge on hold until you are ready to use it again.
- Are you managing your cash flow? Once you collect revenue, are you keeping it in a low- or no-interest account? If so, set up a money market with a higher interest payment, keep your income in that account and then link it to your checking account to pay your bills.
- Do you have a system to pay your invoices early if you get a credit for early payment? If you don’t get a discount for paying early, do you have a system to pay closer to the due date so your money works for you?
The previous examples are a look at your expense side. Of course, you could have leaks in the revenue side of your business, too. Here are some actions you can take on the revenue side.
- Does your business have any recurring income? You may have clients or vendors who have been set up on auto payments that have dropped off. Find out what you can do to get them back in the fold.
- When was the last time you looked at your “low hanging fruit”? The idea here is that you are mining current customers for additional business or customers who have expressed an interest in your product line and haven’t purchased yet.
- Are you paying attention to your competitors? Are you losing business because your competitors solve problems better or serve the customers better than you do? You don’t want to give your customers a reason to move to someone else.
- Are you asking your current customers for referrals? We all find word-of-mouth to be our best advertisers. As you lose some current customers due to normal attrition, they can be replaced through a referral system. If you take the time to look at your expenses and your revenue with an eye to plugging the leaks, your business will grow.
Where are you finding the leaks in your business? Please share in the comment section below what you have discovered.