Issue link: https://www.massageandbodyworkdigital.com/i/1234356
Watch "Managing Cash Flow" SET UP A PAYMENT SCHEDULE It helps to manage your money on a regular schedule as a ritualized task. Schedule it at the same time weekly or twice a month. Put on some lyric-free background music if you're into that (I'm a fan of the Harry Potter soundtrack) and get into a money groove. Take a look at how much money you've taken in since the last time you paid yourself. That's your gross income. Now, pay yourself. Again, you get to decide if you pay yourself a percentage, a certain amount for each massage performed, or a flat amount each pay period. Write yourself a check from your business checking account and deposit it into your personal account or set up an electronic transfer. After you pay yourself, set aside a percentage (or flat amount) of your gross income for taxes. Your accountant or tax preparer can help you figure out what percentage, but if you already know what to pay for quarterly estimated taxes, divide that evenly according to the amount of pay periods between now and the due date for quarterly payments. We strongly encourage you to move the money for taxes into a separate savings account. Do not skip this step. Do not think, "Oh, I'll just set more aside next week." Do it immediately before you are tempted to spend it on something else. It really helps to think of this as the government's money and you are just holding it for them. You could also do what a great employer does: plan for sick days, vacation, and retirement. If that's important to you, set that money aside just as you did for taxes. Finally, the remaining amount of your gross income is what you have to spend on operating expenses, paying the bills, and buying the things you need to run your business. It may take some time to figure out exactly what proportions will work for you and your business. You may find that after paying yourself and setting aside tax money, you don't have enough to pay your bills. You have choices. You can lower your owner's draw, lower your expenses, or earn more money. If you are not dependent on income from your business, it can be tempting to simply decrease your owner's draw. But are you running a business or funding a hobby? There's no wrong answer, but be clear in your purpose. PLAN TO EXPAND YOUR PROFITS Seeing the numbers in action can help motivate you to market your business and get more clients. If you're paying yourself using a flat amount each time, your motivation comes from expanding that profit gap so you can reinvest in the business. If you're paying yourself on percentage, your motivation comes from increasing your take-home pay. Understanding what motivates you can also help you decide which method to use. When you get good at figuring out the proportions that work for you, think a little bigger. Do you want to save a little from each pay period to build up a vacation and sick-pay buffer? See where you can squeeze out another 5 percent, or consider how much more you would need to earn to make that happen. Getting clear about your business finances, especially when the cash flow includes a regular income for you, is illuminating. Whichever method you choose, approach it with intention. You are running a business, providing a valuable service to your clients, and you deserve to be compensated fairly. Allissa Haines and Michael Reynolds can be found at www.massagebusinessblueprint.com, a member-based community designed to help you attract more clients, make more money, and improve your quality of life. Getting clear about your business finances, especially when the cash f low includes a regular income for you, is illuminating. N e w ! A B M P P o c k e t P a t h o l o g y a t w w w. a b m p . c o m / a b m p - p o c k e t - p a t h o l o g y - a p p . 17 This yearlong series from Allissa and Michael continues as planned, in an effort to give MTs the financial knowledge they'll need when the COVID-19 threat has passed and their practices can open safely once again. For financial advice related to COVID-19, make sure and read the special issue of Massage & Bodywork at massageandbodyworkdigital.com.