First Step in Making Money: Send the Paperwork to Your Worker Bees

What’s the #1 concern of small business owners?  

How to manage up’s and down’s in business income each month.  

What’s the #1 concern of individuals? 

How to save more money & have more money available to spend on improving their lifestyle.

Either way, it’s all about managing cash flow.  

Whether you put it under the category of budgeting, cash flow management, pro forma’s, financial planning, or balancing your checkbook, it all comes down to creating a system to achieve your goals by managing and strategizing the cash coming in and going out each month.  On The Wealth Spa I’ve talked about the 4 Step System to Manage Cash Flow.  You can use this system for your household finances, your home business, or a multi-million dollar corporation — the same universal principals apply.  

The first step in managing your cash flow is to get the details out of your way.  One of the details is all the paperwork and records we are required to maintain for tax purposes.  I’m talking about all the documentation to support tax income and tax deductions.  On the personal side, it’s salary information, investment records (both purchases and sales), and deduction records (i.e., property tax, mortgage interest, charitable deductions).  On the business side, it’s income records (invoices and deposit slips) and expense receipts and cancelled checks.  

Whether or not you use this original data to prepare your tax returns (we’ll discuss that next week), you do need to keep all of it in case you get audited.  But you must not get bogged down in these details, because it dose not help you manage you cash flow. 

How to Keep Records:  Personal records may be kept in files by year, along with the tax return for that year.  Business records may be kept in 4 monthly expanding files — one for income, one for deposit slips, one for cancelled checks, and one for receipts.  You may combine travel, automobile expenses, entertainment, and dining records with the receipts (just write notes directly on the back of the receipt), or keep logs in a separate file or journal - whatever is easier for you.

You can keep these documents as electronic files.  But, I find that scanning the documents takes more time then throwing them into files.  And who cares about having a pdf of a Starbucks’ receipt from 1998 on your computer?  

How to Maintain Records:  If at all possible, delegate to your Worker Bees!  Have your Virtual Assistant, Personal Assistant, Professional Organizer, spouse, responsible teenager, stay-at-home-mom neighbor, or babysitter take over this job.  (And yes, not only rich people have VA’s and PA’s - you can get someone for just 2 hours a week.)  All they need to do is sort the paper by year or month, label the files, and stick the documents into the files.  There is no reason for you to do it, except to manage that it gets done regularly (at least monthly).  

The Wealth Spa Minute

Do you have a pile of receipts?  Cancelled checks?  Notes and logs?  Stop dealing with this paper and get it off your desk into a simple expandable file.  Even better - delegate this task to your Virtual Assistant or Personal Assistant.  

 

Collecting Your Money: What to Do When A Client Does Not Pay

Guest post by Sandra P. Martini, the Automatic Business Coach.

You’re psyched! You just landed a new client who is going to keep you busy with projects. Life is good.

You love the people, you’re really enjoying the work, things are going great. Everything proceeds along smoothly for several months until that fateful month where you submit a large invoice and payment isn’t immediate.

“No problem” you think. “Things are somewhat tight. It will just be paid a little late.” 

What are your options when a client doesn’t – or can’t – pay you?

There are several things you can do when a client doesn’t pay you. Before you start down the path however, you need to think about what type of future, if any, you want with this client.

1. Gentle reminder.

Your invoice could have been forgotten, misplaced or buried in a pile on your client’s desk. If they have gone past your due date, email – or call depending on what is most comfortable for you – a gentle reminder asking them the status of payment.

If you use QuickBooks or QuickBooks Online, you can also email a statement directly from the system.

2. Be personal.

If you’ve reminded the client and no payment has come, it is time for either another email or a phone call. Your client may tell you that he is very busy and apologizes that he “forgot” again.

Explain that cash flow is very important to your small business and that you can not afford to carry the unpaid invoice any longer.

Always remember to make it easy for your client to pay you. Tell him that you are happy to be paid via wire, PayPal, credit card – offer him all the options and be sure that you have more than just “send a check” available. Make it as easy as possible!

3. Be the “squeaky wheel”.

If your client is having his own cash flow issues, he may need to make hard choices about who gets paid when. Send an email reminder or statement every other day or every week – take your comfort level and go one step further.

By being the “squeaky wheel”, you insure that you are at the forefront of his mind when he is paying bills.

4. Cut him off.

As hard as it is, sometimes you need to tell the client – even though you’ve become friends – that you can not do any additional work until your invoices are paid in full.

As a small business owner, you are responsible for the running of your business and, as a result, there are times when you need to make tough decisions that are best for your business. You can’t afford to work without compensation and your client should understand that.

5. Get tough.

You’ve tried being gentle. You’ve tried being personal. And you’ve squeaked so many times that you’re tired of hearing your own voice. Now it’s time to put that prepaid legal plan to use!

Have your attorney send a formal letter stating that if you are not paid, in full, within X number of days, that you will either take the client to small claims court (the normal limit is between $2,000 and $7,500 – it varies by state in the U.S.) or to arbitration. Whether you sue or go to arbitration depends on the contract you have with your client as some state that disputes will be arbitrated. 

6. Bigger than small claims.

If the client owes you substantially more than the small claims process will allow you to sue for, you may wish to sue in a formal state trial court. Debt collection cases are usually simple and few collection cases actually make it to trial as most defendants either settle before trial or fail to show up for court (in which case you would receive a default judgment).

Chances are if you threaten legal action, your client will pay up. If he doesn’t, you may have to follow through on your threat. Just remember to make this decision taking into account how much you are owed, your time for the legal action and whether or not you ever wish to work with this client in the future.

Note that if the client never pays you, you *may* be able to deduct the amount as a “bad debt”. See your tax advisor for more information regarding the bad debt rule.

You want to take collection actions that you are comfortable with while thinking about how they will affect your future relationship with the client. Keep in mind however that you are a small business owner and should be promptly paid for services rendered and accepted. After all, you didn’t go into business for yourself to work for free!

© Sandra P. Martini, The Automatic Business Coach 2007. 

Get Sandra Martini’s FREE “5 Simple Steps to Putting Your Marketing on Autopilot” e-course/audio mini-workshop and her FREE small business success how-to tips at www.SandraMartini.com

Balancing the Checkbook: My not-so-dirty little secret

We grew up in a world where responsible personal money management included balancing your checkbook.  You were supposed to write down all your checks in your ledger, and balance it each month again your bank statement.

Perhaps you are one of the few people still left who do this each month.  Perhaps you are an accountant, or an engineer.  Or, you use Quicken to download & balance your transactions.

But probably not.  You most likely have not balanced your checkbook in years, if ever.  And yet, you feel guilty about it, as if you are not a good manager of the family finances.

Stop feeling guilty.

I don’t balance my checkbook.

I don’t even have a checkbook.  

Balancing a checkbook comes from the days when we wrote checks.   Read more

Books & Products

Grow Up! Strategies:  The 7 Legal & Financial Strategies You Need to Up-Level Your Small Business

Grow Up! Strategies by Elizabeth Potts Weinstein, Attorney and Certified Financial Planner, contains simple, practical answers to the questions you’ve been dying to ask your attorney or financial advisor … and will teach you how to transform your small business into your dream empire.  

Grow Up! Strategies includes information on business planning, cash flow, financing, trademarks & copyrights, government regulations, taxes, asset protection, and exit planning.

Click to learn more

The Money Tree System:  How to Attract More Money in Just 15 Minutes per Week

Do you want to stop struggling to make money, and start effortlessly attracting income into your business?

Instead of confusion & frustration when you review your finances, would you rather feel curiosity and excitement?

The Money Tree System is a step-by-step method created by Elizabeth Potts Weinstein, to get over your fears about your small business finances, manage the income and expenses of your business, and effortlessly attract more money to you — in just 15 minutes per week.

Click here to learn more

Ep #49 Cash Flow and the Top 4 Mistakes Business Owners Make with Cash Flow

Elizabeth defines and analyzes cash flow and it’s affect on your small business as well as your personal life…not only the amount of the cash flowing in and the cash flowing out, but the timing. She explains how timing and looking forward affect your small business’ cash flow. Elizabeth answers a listener question about Identity Theft and what you need to do if your purse/wallet is stolen and shares her Entreprenuer’s Success Tip of the Week: Time Perception, Doing #1 First.

Click here to download the show

Books 101: The Right Way to Keep Your Small Business Bookkeeping

Books refers to the financial records of your business, kept in a way such that you can generate reports for tax purposes and for you to analyze the performance of your business.  The books include information about your income & expenses and your assets & debts.  

There is no one right way to keep books — you must choose a method that makes sense for how your business works, that you understand, and that you can use to create good reports.   Read more

How to Avoid the 4 Cash Flow Mistakes, part 4

Cash Flow Mistake #4 - Missing a System. 

Have you:  Created a beautiful, highly detailed cash flow projection spreadsheet — never to look at it again?  Been six months or more behind in your bookkeeping, until your tax accountant is ready to fire you as a client?  Spent hundreds of dollars on advertising that got you nowhere fast?  Decide if you can afford something by today’s balance in your checking account?  Been crazy-busy with clients, and all of a sudden, your business completely dries up?

Here’s the Truth:  You need a system.  Managing your cash flow must become a habit.  Each week set an appointment on your calendar for a "Money Meeting" with yourself to review the finances of your business.  Schedule this appointment & commit to it just like a client meeting or doctor’s appointment.  Could be as little as 10-20 minutes per week — if it overwhelms you, set a timer for just 15 focused minutes and give yourself permission to stop when the timer says "buzz."

Having accountability issues?  Hook up with another member of the Mastermind and schedule your appointments together.  At the set time call each other to confirm you are reviewing your finances, and send up a follow-up email afterwards to celebrate your progress (no need to share the exact financial details). 

How to Avoid the 4 Cash Flow Mistakes, part 3

Cash Flow Mistake #3 - "It Must Be Perfect."

I know a new client has fallen for this mistake when they hand me a multi-page, color coded, 40-category Cash Flow Projection spreadsheet.  And it’s dated 3 years ago.

In an effort to "do it right," we try to create financial reports that are completely accurate and perfect.  Everything according to Fortune-500 accounting principles, highly detailed notes, extensive competitor research, and sub-part after sub-category.  But what happens?

These beautiful spreadsheets gets stuck in a drawer, never to be used again.  What a colossal waste of your time! 

Here’s the Truth:  Simple is powerful. You need short, summarized financial reporting that you can actually use!  You can use two simple one-page spreadsheets to troubleshoot income problems before they start and make powerful planning decisions for the future of your business. 

These two spreadsheets are Marketing & Sales Weekly Report (statistics tracking your sales process and how you generate income) and Monthly Cash Flow Projections (projected income and budgeted expenses).

By the way, perfection is impossible.  When you are projecting the income or budgeting the expenses of your business, you are trying to predict the future.  It’s an educated guess.  Your projections will never be perfect — but all you need is information just "good enough" to help you create and make changes to your business & marketing plans. 

Trying to predict weekly Cash Flow?  If you are trying to micro-manage weekly Cash Flow Projections, that’s a sign you need short-term financing, such as a business Line of Credit or even a traditional American Express card. 

(part 4 coming next week)

Ep 38 How to Step into Your Power as a Business Owner

This week Elizabeth invites Casey Dawes who teaches women business owners how to step into their power as  business leaders.  Casey shares tips on balancing your business and your home, the biggest unique problem women business owners face and the 4 areas that women consistently avoid in life and business.  Elizabeth answers a listener question on balancing growth with cash flow and shares her Entrepreneur’s Success Tip of the Week:  What is Your Real Financial Goal for Your Business?

P.S. This interview isn’t just for women…Men will gain powerful information too.

Click here to download the show.

How to Avoid the 4 Cash Flow Mistakes, part 2

Cash Flow Mistake #2 - "I’m Not Good With Money."

I know some of you reading this article are saying, "but Elizabeth, I’m just not good with money.  I’m not a numbers person."  I’m here to get in your face and say, pshaw!  I don’t buy that story!

First, if you are constantly saying to yourself that you are not good with money, what message are you saying to yourself, your clients, and the universe?  Before great wealth will ever manifest itself in your life, you must change the mantra in your brain.   Read more

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