By now you realize the revenue in your business is not always linear. Some months you feel like you have stellar income and other months make you feel like everything could go underwater. Hustling is the only method you know to manage the monthly ebbs and flows.
Well, today I want to teach you how to manage your finances intentionally so you can avoid feast or famine cycles in your business, create predictability and reduce financial stress. This approach will also help you stop worrying about whether you can pay yourself consistently, save for taxes, or afford to invest in your business.
Manage Fluctuating Income In Your Business
If you want to manage your fluctuating income and create predictable cash flow follow these four simple steps.
1. Get clear on your monthly revenue from the last twelve months.
Pull up your financial spreadsheet or Quickbooks, or talk to your bookkeeper and list your actual revenue for the last twelve months (you can also use the fewer months if you’re just starting out). You should have a list that looks like the one below.
2. Calculate your AVERAGE MONTHLY income.
Now, add up the total amount of revenue and divide it by the number of months you added to find your average monthly revenue. For example, using the numbers above, I’d add up my income from January to June and divide the total by six. So, I’d do $37,156 divided by 6. My average monthly income would be $6192.67.
3. Use this number as a baseline for making decisions in your business
Now that you have an idea of how much money you bring into your business, on average, you can stop focusing on months that are much higher or lower. This will cause you to shift how you think about your monthly cash flow. For example, if your average monthly revenue is $6,192.67 you can now easily determine how much to pay yourself and how much you should allocate towards business expenses each month. If you’re always operating off of this average amount, it will allow you to set aside extra money during higher revenue months and prepare for months when your revenue is lower or when you want to step away from your business for a well-deserved month-long vacation.
4. Repeat this process in the next six to twelve months.
As you continue to earn money in your business, keep your eye on your monthly revenue. The most important thing is that you want to make looking at your revenue a regular practice (because things change in business!). Keeping your eye on changes in your cash flow will help you make intentional decisions about when you can invest more in your business or increase the amount you’re spending on expenses. When you see that your revenue has a clear upward trend over a six to twelve month period you can revisit how much more you can afford to pay yourself with ease and the worry that you won’t be prepared for a change in cash flow.
This small shift in looking at your average monthly income will shift everything in your business because you’ll be able to manage your finances with ease. Watch my free mini-training where I walk you through these four simple steps and dig a little deeper to show you what to do next to be intentional with your business finances.
When I’m working with clients in my intensive creatives, I help them create a plan to manage their monthly revenue to start paying themselves consistently, save for taxes, and make a plan to invest in their business. If you’re ready to have manage your finances, intentionally apply to work with me.
All the best,