4 Make-Or-Break Financial Skills for Creatives
IMAGE ID: “Small businesses contribute 43.7% of our GDO and 2/3 of new jobs. If your financial skills aren’t ready to claim this energy, then this one’s for you” in quotes, said by Gina Knox, money coach for entrepreneurs.
Whether you’re starting a new creative endeavor or have been running a creative business for a decade, there are a few financial skills every business owner must understand to succeed long-term. We know that finances can be scary, especially when accessible tools are lacking for personal financial literacy, let alone business financial literacy. To help combat that, we’ve reached out to our community to gain insights on how to simplify and overcome any anxiety about your business finances to close the financial literacy gap. You don’t have to be a financial expert to experience financial success. In fact, all you need are the right tools and some guidance in the right direction to get on the right track.
To help us learn more about our finances, we chatted with Gina Knox, a financial coach for entrepreneurs, who specializes in helping people pay themselves more and save their first 100k. Her mission is to help end entrepreneurial poverty and squash entrepreneurial debt. In 2021 her clients collectively increased their net worth by over a million dollars. Gina has simplified her framework into a two-part process: Clear Money Movement and Clear Money Mindset. Today, we will cover Clear Money Movement through the following four imperative financial skills.
1. Budgeting
Just like with personal finance, having the skill to create and follow a budget can empower you to better plan for the longevity and sustainability of your finances. The amount you spend in your business directly impacts your profit margins (and by extension your take-home pay!), so minimizing your costs where possible is in your best interest. Invest time in regularly reviewing your spending habits to audit for opportunities to cancel unused subscriptions or renegotiate costs.
Gina says, “I recommend keeping a log of your usual monthly business expenses, and then having a discretionary fund (an amount of money not specified for one purpose) on the side for larger, irregular business investments - this helps with budgeting for the day to day, while acknowledging that unexpected things come up!”
Creating a budget for your business can empower your business to grow through strategic investments. To get started, review your financial statements to familiarize yourself with the resources available to you to make future investments. Then, start to build an action plan to put purpose behind your investments.
Result: Budgeting will give you more control over your moola and more money left for you at the end of the day, not to mention no surprise late payments on things like rent.
2. Bookkeeping
To have accurate financial statements, you must create and maintain these documents through regular bookkeeping. Bookkeeping is simply the process of tracking your daily business transactions. What does Gina have to say about this?
“Here’s the real-real: Waiting until the end of the year to do all your bookkeeping is a pain. You’re going to spend HOURS going back through transactions before the April 15th deadline. Bookkeeping on a monthly basis will not only save you time but will also help you find extra tax deductions that can potentially save you thousands on your taxes! Win-win.”
Simplifying your bookkeeping starts with opening a bank account to separate your personal finances from business finances. This way, you can eliminate one (very big, time-consuming) step of combing through every transaction year after year to document your business transactions, not to mention the added benefits of having your ish together if you decide to seek business loans, grants, or investors.
To help you with your bookkeeping, there are tools to simplify bookkeeping for small businesses such as QuickBooks, or you can hire a bookkeeper or accountant. An inexpensive alternative is to enter data manually using spreadsheets. Here’s a link for free templates from QuickBooks!
To keep your finances organized, we recommend opening a bank account as soon as possible so your business transactions and personal transactions are always separate. This will help to simplify your bookkeeping processes. We recommend our friends and financial professionals at Bank of the West for business banking!
Result: Aside from giving you accurate financial statements, bookkeeping will familiarize you with your money movement so you can make financial decisions with the latest information and potentially save on your taxes.
3. Understanding financial statements
To get the best understanding of your business’s financial health, you need accurate and up-to-date documentation of a few financial statements. There are many financial indicators you can track to understand your financial wellbeing, but we’ve narrowed it down to just two to keep things simple when you’re starting out. Just in case you missed it above, here’s a link to free templates from QuickBooks. Here’s a quick guide to what each statement contributes to getting the best snapshot of your business finances
Balance sheet: this document tracks your business’s assets, liability, and equity and is most helpful when approaching business lenders–be sure to review and understand the definitions of assets, liability, and equity.
Profit and loss statement: this document tracks your expenses, revenue, and profits and helps to give you an understanding of your business’s ability to make profits
Result: Understanding your financial statements will allow you to make better decisions with the latest information. On top of that, you’ll be able to speak the lingo so you can have confident conversations with grantmakers, financial advisors, lenders, and investors.
4. An Effective Invoicing Process
Though it may seem obvious, your clients making payments on time significantly impacts your bottom line, which is why having an effective invoicing process can greatly affect a business’s success.
“Cash flow is like oxygen to a business, which means simplifying your invoicing so you can get paid easily and on time is key," advises Gina.
Late invoices can easily cramp your style, preventing investments from moving forward and preventing your business from growing or operating. To keep up with your invoices, there are tools for small businesses through most payment processing systems (our preferred system is Quickbooks). These payment processing systems can help you request and receive funds, remind clients about payment schedules, and track payments. Less for you to worry about means more time for you to get back to what matters to you!
Result: MO’ MONEY! It’s that simple.
Ready to take your financial literacy skills to the next level?
With these four financial skills, you’ll be well on your way to building a growing, thriving business! Remember to prioritize your wellbeing above all else and to focus on what’s important to you. For more community support and tools, be sure to check out our offerings for membership and business development events, and for free financial resources to support your creative endeavor, be sure to sign up for our newsletter below!