Engineer the New Year With Financial Management

Happy New Year! The New Year is here and the time is ripe to take a fresh look at how you can bring more revenue and profit to your Solopreneur enterprise. Let the New Year inspire you to create the conditions that will generate a successful and rewarding consulting career. Kick off the process by looking at how effective financial management promotes that goal.

Resolve to skillfully manage cash flow

Cash is king and cash-flow is the life-blood of every business. Nothing flows unless the money does. Cash-flow management means knowing how much money is expected to enter your coffers and when those checks are expected to arrive, along with knowing how much money must be paid to creditors and when those checks must be sent.

Even if your Profit & Loss statement shows a net profit at the end of the month, it’s nevertheless possible to have insufficient cash in hand to pay monthly bills and other accounts payable when they are due. We all know that working as a Solopreneur can be cash-flow touch and go, so it’s vital to get arms around the accounts receivable, or else sleepless nights will haunt.

Cash-flow management actually begins in client meetings. Once your project fee has been discussed and agreed upon, diplomatically state that 15% – 20% of the fee is due at contract signing and that invoices are payable upon receipt. The payment schedule for the balance will depend upon the length, type and cost structure of the job.

Whatever you do, don’t allow more than 35% of your fee to be payable at project conclusion (unless it’s a small job). Take steps to discourage the client from preserving his/her organization’s cash flow at your expense. Write payment terms into the contract, right along with the scope of your work, the deliverables and the start date.

Resolve to get paid what you are worth

Establishing value and getting paidd for same is the goal in every service business. Whether it’s teaching piano or being a nanny. Your pricing strategy should reflect the value that your services bring to the client. Needless to say, pricing supports cash flow and revenue. To identify an appropriate fee range, pricing experts recommend that you focus on four factors:

  • The perceived value of the services your provide
  • The demand for your services and your reputation as a purveyor
  • What’s involved in the delivery of your service (time = production cost = the Solopreneuer’s cost of goods sold)
  • Your mark-up / profit margin

Resolve to create and analyze the basic financial statements every quarter

Solopreneurs have a good idea as to how we’re faring financially. Because we either have the desired amount of money in the bank or we don’t. We either have jobs in-house or we don’t. We have either big jobs in, or small jobs. Like a balance sheet, your bank statement provides the snapshot of your financial picture at a given moment.

There’s nothing like creating and analyzing cash-flow. And income (profit & loss) statements to enable one’s understanding of the financial condition of the enterprise. And gain insight into what would be advantageous to do about the business model and/or marketing segments of your consultancy. Smart business decisions are invariably data-driven.

If you look back at prior years’ financials, you may identify regularly occurring busy periods and decide to hire temporary help. Which could mean bringing in a colleague Solopreneur to work as a sub-contractor. So that you will make the most of your opportunities.

Slow periods will likewise be identifiedd and you’ll be encouragedd to find ways to either stimulate business during those times by incentivizing clients to hire you. Or find occasional work, such as teaching. Engaging in prospecting, networking and professional development activities are other valuable ways to make productive use of slow periods.

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