The Must-Have Monthly Budget Plan for Creatives (or any non-accountant)

I was recently sitting at coffee with a group of fellow women business owners when the topic turned to budgeting. One of the women mentioned that she had created her first budget that week and asked for tips and strategies that we used to stay on track. Now, admittedly, budgeting is not the sexiest topic in the world, but you should have seen the reaction from the table. Everyone lit up talking about smart ways to make money work for you and your business.

There is something empowering about having a good handle on your finances, but most business owners avoid it until the last minute or do the bare minimum to get by. This leads to what I call “creative bill paying” (pulling funds from several accounts to pay the bills), undue stress, and the feeling that you’re never off the hamster wheel of trying to get clients.

Get started building your business budget today with these 4 (fairly painless) steps.

Make your money work for you (and not the other way around!)

 

FREE DOWNLOAD: Monthly Budget Plan

 

Define Categories

Have you ever sat down to write a blog post without any notes, outline, etc.? You’re just staring at a blank screen willing your brain to come up with something genius. If you’re like me, more times than not, your brain rebels against you and you end up getting up to get 3 more cups of coffee, playing with the dog, cleaning the house before you ever sit back down to finish writing. All because you didn’t have a place to start.

If you’re going to create a budgeting system that works for you, the first thing to do is create a framework that makes sense for your business. A starting point that will make it easy for you to manage your budget. This framework comes in the form of categories.

Start by looking at all of your receipts over the last 3 months. Do they fall into certain types of expenses? Advertising, Office Supplies, Materials, Communication, Travel etc? Make a list of all of the expense categories that you need in your business. This may vary depending on the complexity of your products and services. For example, if you offer different types of products, you might want to track the materials for them separately so that you know how much you spent making each type of product.

Once you have your expenses categorized, move onto your income. You’ll likely have fewer income categories than expenses, but determine what works best for you. For me, my income breaks into the following types: Consulting, Online (courses, ebooks, etc.), and Freelance Projects.

Pro tip: Talk with your accountant to make sure that your expense categories line up with how you’ll file taxes and track deductions to make tax prep that much easier.

 

Project Expenses and Income

The term “budgeting” so often has a negative connotation. If you’ve ever put yourself on a budget (or been put on one unwillingly)  it usually means you’re limiting your expenses. No more dinners out, shopping trips, or travel. But in terms of your business, I want you to think about finances as if it’s the fuel that runs your company. Budgeting simply helps you predict how much you’ll need to get where you want to go.

As you’re building your budget, it’s important to predict both how much you’ll make and how much it will take to get there. Don’t stress out over these numbers being EXACT, just use the projections to help you better understand your cash flow needs and revenue numbers. For those of you who have more cyclical businesses, creating yearly expense and income projections can help you stabilize and manage your money through the busy and slow seasons.

Projecting your expenses can be pretty simple. Take a look at your expenses over the last 3 months and calculate the average. Are you expecting any large variations in expenses in the coming months? Will your costs of materials increase or decrease for any reason? Adjust for those then create your projection. I always recommend overstating your expenses by 10-15% to be safe.

Revenue can be a bit trickier to project, especially if you’re in your first year or two of business ownership. For those of you who make products or focus on short-term sales, consider if you have any big campaigns that you’re running, any past success indicators, and trends to project your sales numbers. In my business, the sales cycle is a bit longer so I look at my pipeline of prospects that I’ve talked to and consider my close rate. For example, if I talk to 5 entrepreneurs, usually one out of that group will hire me to coach them. That helps me project what my revenue might be over the course of the year. With revenue projections, apply the opposite from your expense projections – you want to UNDERESTIMATE by 10-15%.

When creating your projections, start to think about how this knowledge will positively impact your decision making and empower you to be informed about what makes your business run.

Track Earnings and Purchases

We’ve all been there – April 1st rolls around and we’re scrambling for receipts. Digging them out of the depths of your car floorboards, boxes you might have stored them in, or the dreaded email inbox. Do yourself a favor as you’re creating a budget plan and build in a tracking system that both works for you and helps you avoid the receipt scavenger hunt each spring.

First, determine what system you’ll use to log your transactions. Depending on the volume of purchases and sales, anything from an excel spreadsheet (download this one for free) to online software like Wave or Quickbooks may work. I am a big fan of Wave (want to know why?). As you’re evaluating options, list what functions you’ll need. Simple accounting? Payment processing? Reporting?

Once you’ve found a system that works for you, build in a time in your calendar each week or month that is dedicated to reviewing and logging transactions. The key is consistency, so make sure that you choose a time that you won’t be tempted to skip or push back.

Finally, solidify your process. What will you do when you have a random receipt that you need to track? What if you trade or barter services? Write down what steps you’ll take to make sure nothing slips through the cracks.

 

Review + Invest

The fun part comes now that you’re organized. Remember, creating a budget is supposed to be empowering. Not only does it give you more visibility and control over your business, but it allows you to make smart decisions and investments into your growth.

I recommend setting aside time each quarter to review your budget and financial situation. Seek to understand what worked, what didn’t work, and where you can improve. Tweak your process as needed. Adjust your projections. Set aside money for taxes. Business finances are a moving target, so make sure you’re re-aligning as you go.

Once you have a deeper understanding of your position, consider where you can make investments into your business. What percentage of your revenue are you currently putting toward marketing? Can you increase that at all based on your sales? Do you want to improve your product by investing in higher quality materials?

Looking at your finances as a strategic asset to your business rather than something to be avoided will allow you to work faster and more efficiently towards your goals. Have a recommendation that I didn’t list? Let me know what works for you in the comments below!

Showing 2 comments
  • Michelle Pascoe
    Reply

    Excellent article Brette especially the tip with the accountant it saves a lot of double handling if both your financial systems connect. Xero is another great software solution that provides great reports and analysis as your business grows. It also links with a lot of CRM’s and other add ons.

    Michelle

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