Confession #1: I LOVE RuPaul’s Drag Race. I absolutely adore the artistry of drag and the creativity that goes into the costumes, makeup, performance, and overall look. Confession #2: The makeover episode is ALWAYS my favorite. If you haven’t seen the show, every season the queens make over a group of people. One year it was the crew, another year it was grooms to be, and another year it was gay veterans.
What I love most about makeovers is the big reveal at the end. I love seeing how all the planning and hard work translates into a beautiful, new drag queen. Confession #3: I dream of being made over on RuPaul’s Drag Race.
Okay, so what do drag queens have to do with money? Not much other than sometimes we need to do a makeover of our money. Sometimes, what’s going on in our money just isn’t working. The wig, the eyeliner, the padding- it’s all wrong- and it’s time for a big change.
BUT most of the time we don’t know when our money needs a makeover. We don’t recognize the warning signs because we’ve been in it for too long. We’re used to the way it is: disorganized, confusing, frustrating, and we think this is how it’s supposed to be.
Which is why I wrote this blog post. To help you figure out if your money needs a makeover and, if so, what to do next.
Here are 5 signs that your money needs a makeover:
You aren’t tracking your income and expenses
You might be thinking, “Well I don’t track my income and expenses because I don’t have time!” Which seems like a good excuse buuuuut… you should have an income/expense tracking system that doesn’t take a lot of time to maintain.
If not, your money needs a makeover.
Financial recordkeeping shouldn’t take all day. If yours is taking more than 1-2 hours a week then there are a few things wrong. One, your system isn’t automated. No automated bookkeeping system takes more than 2 hours a week unless you’re a HUGE corporation.
Two, there’s something in your books that needs to be streamlined. Streamlining is different than automation. Automation is about getting technology to do most of the work for you. Streamlining is cutting out unnecessary processes, accounts, expense categories, and payment methods that are creating more work.
Think of it like being a minimalist for your money.
Messy and time-consuming books are combination of not being automated and having WAY too much going on in them. To fix them, start with an audit of your financial system. Identify what isn’t working, what’s taking you too long, and what you need to change. Then, look for software that you can use to automate your bookkeeping and streamlining your processes (psssst- grab my free bookkeeping software automation guide here.Messy and time-consuming books are combination of not being automated and having WAY too much going on in them.Click To Tweet
You never get your taxes done on time
If your bookkeeping system is a mess and you’re not tracking your income and expenses then you’re probably not getting your taxes done on time. Taxes are like that rain cloud in cartoons that follow you around even when it’s sunny out. They loom over you with impending doom and cause last minute anxiety that you forgot to add something to your return.
Friends! Taxes don’t have to be like that! But, if they are for you, then your financial system needs a makeover.
Taxes can (and should) be pain-free. It should be as easy as running a report, sending your tracking sheets to your tax preparer, and having a meeting to go over a few things. They shouldn’t feel a Y2K panic party.
If they do feel like that here’s what’s wrong. First, your bookkeeping system is ineffective. An effective bookkeeping is easy to keep up with throughout the year (no last minute scrambling) and easy to extract information from.
Two, your financial paperwork isn’t organized. You know, that stuff that comes in that you’re supposed to save for taxes. If everything is shoved in a shoebox and then you dump it out once a year to find what you need, filing your taxes is going to suck.
Finally, you’re unclear on WHAT you should be tracking. I see this a lot with new business owners. They put off filing their taxes because they’re afraid that they’ll make a horrible mistake. Start educating yourself now about your tax deductions and what you need to do in the tax prep process so you’re not immobilized by fear.
You overdraw your account (or get close)
Overdrawing your bank account or getting dangerously close to $0 every month is a sign of poor cash flow management. Cash flow is the actual cash (like real money, not invoices you send) moving through your business. It’s money that comes in as sales and then it’s money that goes out when you spend it.Overdrawing your bank account or getting dangerously close to $0 every month is a sign of poor cash flow management.Click To Tweet
I repeat- cash flow is REAL money. It is not hypothetical “when I sell this I’ll have this much to spend”– it is what exists in your business right now. Which is where people go wrong with cash flow and spending. They spend based on money they haven’t earned yet and their projections.
Even if your projections are correct, there’s a big factor in cash flow that you need to consider: WHEN will you get paid. Sure, you can have an outstanding invoice for $5,000, but if you spend that money before you get paid you’re going to be hovering REALLY close to $0.
So what do you do if your cash flow is screwed up? Review your payment policies, make a budget, and do a spending audit. These are the first steps to getting your cash flow under control.
You work all the time and are still broke
This used to be me. FOR YEARS. And to be honest, this is probs one of the worst feelings as a business owner because you can’t figure out what’s wrong. You have clients. You have work. You have a business that’s bringing in decent money- but you’re STILL broke.
This goes back to cash flow but in a way we haven’t talked about yet- how much you get paid. If you’re working and working and working and still never have enough it’s a sign that you aren’t getting paid enough.
Which means….drum roll……..dun….dun….dun….you need to raise your rates and prices.
If you’re getting paid enough for your products or service, and you’re managing your cash flow through budgeting, then you shouldn’t be broke. Why? Because your rate should reflect your taxes, your operating costs, and a little bit more to make a profit.
That’s right- your rate is NOT an arbitrary number that you just decide to charge. It’s a number that is carefully calculated based on other factors in your business. If you haven’t taken the time to figure out what your rate should be based on these factors then it’s time for a pricing makeover.Your rate is NOT an arbitrary number that you just decide to charge.Click To Tweet
You don’t pay your quarterly taxes
If you aren’t saving for and paying your quarterly taxes then you need to reevaluate your financial system.
A lot of business owners tell me that they don’t pay their taxes because they don’t have the money. And that’s not really it. It’s that you haven’t set your rates to cover your taxes.
Part of what you’re getting paid for ARE your taxes. When you set your rate you need to include your taxes into your pricing. This means that you’ve already built your taxes into your business budget. If you’ve done this then paying your taxes won’t impact your cash flow because you’ve accounted for it.
Sometimes small business owners resist paying their taxes so they spend the money instead. Taxes are the last thing you want to spend money on, and I get that, BUT you’re going to have to pay them sooner or later. It’s either ahead of time (through estimated tax payments) or after (via a payment plan).
You WILL have to pay your taxes eventually. Instead of resisting them all year and then being freaked out when you get your tax bill- practice self-love by putting the money away now. By taking a proactive approach you prevent a bunch of yucky feelings later.
Don’t forget to sign up for my free 5-day training series kicking off next week on how to organize your finances. Register here!