Managing your creative practice requires the same basic blocking and tackling business skills as managing any other professional practice. The most basic of all is managing your money. Now that we’re facing the economic fallout from the decisions to close down so many businesses in response to COVID-19, a sharp downturn is upon us. Now, more than ever you need to keep a close eye on your business metrics, and most of all your cash flow projections.
Flying by Your Financial Instruments
In the face of a storm you’ll need to “fly by instruments” more than by what you hear from clients and prospects. All the signals you’ve received up until now are out the window. Timelines for projects are all disrupted. New business is going to stall. So, how much economic runway do you have? How long will it last? And what can you do to stretch your resources?
The instrument you need to answer these questions is a cash flow projection spreadsheet. Without this instrument, you’re flying blind.
The good news is, you’re probably going to have some time on your hands. If you have not set up a cash flow forecast for your business, this is the perfect moment to use some of your time to get this set up. And while you’re at it, you can get your finances into a true accounting system like Quickbooks.
Resources for Managing Cash Flow
Additionally, chapters two and nine in my book, Blazing the Freelance Trail, explain the importance of managing cash flow, and provide tips and techniques for managing this vital financial dashboard.
I also have a sample Google cash flow spreadsheet linked on my resources page that you can use to get started.
Free Access to Cash Flow Training Videos
And in light of the current crisis, I’m opening two of my training videos in the Business Essentials for Creative Entrepreneurs course to help you with the details of setting up your cash flow projections. They will walk you step by step through the process of setting up and maintaining a cash flow projection spreadsheet.
Cash Flow Projections are Your Early Warning System
When I navigated my creative practice through the dot com bubble burst of 2000, 9-11, and the housing and financial crisis of 2008, monitoring cash flow was a critical daily practice. Without that critical insight from my “advance financial warning system” I would not have made it through those downturns.
Cash flow projections show you just how much your current and projected revenue will last alongside the expenses you’ll incur over the same time period. If you can know that you’re going to hit the red in three weeks, you know that you need to make significant adjustments right now. But if you see that you have positive cash flow for a few months out, you can afford to take a cautious “wait and see” approach before making hard decisions in the face of a crisis. But if you don’t know where you stand, all you can do is worry and make guesses. And most of those guesses will be wrong. You’ll either be too optimistic and end up hitting a wall at full speed, or too pessimistic and make unnecessary cuts, which might negatively impact you down the road.
It’s Time to Master Your Cash Flow
Your cash flow projection provides the information, the ballast you need, to competently manage your business through this storm.
You owe it to yourself to finally get your head around how to manage a basic spreadsheet so that you can undergird your creative practice with essential business practices that can preserve your work and help you manage through the crisis and flourish when the sun starts shining again.