My thoughts today center on the creative management of business finances. I am very interested in the topic of creativity. I particularly enjoy the topic of building and running a business. So, as much as I think about the product, I also think about the business. I strive to learn, develop, and adopt disciplines for running a business. Typically, the disciplines are not new concepts, but sometimes they are for me. Learning about them and implementing them is part of my creative process.
Some key processes/activities for managing your business finances include:
- Use accounting software to keep track of your finances – I currently use Wave.
- Knowing your numbers – What’s your monthly budget for sales and expenses.
- Maintaining a positive cash flow in the checking account – Do you have enough money in your account to cover your monthly operating expenses?
- Plan for payroll – Determine the appropriate percentage of revenue that should be allocated for payroll and budget for that, even if you just slide that money. into a savings account for the business. Do this even if you don’t have employees.
- Use your current ratio as a key indicator of your business’ health – between 1 and 2 is typically a healthy number.
If you don’t know what current ratio is, here is a simple definition. It is your current assets over your current liabilities. You’ll get those numbers from the account balance reports in your accounting software. If your ratio is greater than one, then your business is in a positive position.
What processes and disciplines do you rely on for the creative management of business finances?