Know Your Numbers

February 10, 2017

What do you do when you’re freaking out about money even if you’re making a good amount of money in your business? We’re sharing tips on how to really know your numbers and get your spending under control so you don’t feel like you’re living invoice to invoice.

Learn More about the Topics Discussed in this Episode
This Episode Brought to You By:
"As your business becomes more complex, the structure between your revenue and profit changes."
- Emily Thompson

Resources

More from Kathleen

Braid Creative

More from Emily

Almanac Supply Co.

Transcript

Emily Thompson 0:02
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Kathleen Shannon 1:21
Hey guys, it's Kathleen and Emily here for your Friday minisode. We've got Caitlin with us here to help us. So Caitlin, what do we have today?

Emily Thompson 1:29
Okay, I know we've talked a lot about money, money mindset, but it's a favorite topic here at being boss. So I've got another question from the clubhouse that I think you guys will like, this comes from Emma. And she says, guys, I am so fed up with being stressed about money. And after hearing Emily and Kathleen talk about knowing your numbers and being in charge of your finances, I did the hard thing and just made a rinky dink spreadsheet with everything I've made since October. The number has me really confused and wondering how it could possibly be so high. But I'm so poor right now. I'm 99% sure it's correct. And even might be missing some line items. I don't really know what else to say. But I wanted to post this here and maybe ask advice on what to do now, since I'm making really decent money, but always freaking out. Side note, my guy and I are starting a spending freeze tomorrow.

Emily Thompson 2:18
That scares me. Spending freezes scare me.

Kathleen Shannon 2:24
I got divorced over a spending freeze once. So that one down that one time that one time I got divorced, I'm pretty sure it started with and put on a budget. Okay, so I actually really liked this question. And I remember seeing it in the Facebook group and I wanted to respond so badly. I'm glad that I save that for a minisode or saved being able to talk about it for a minisode. So okay, here's the thing, there's a couple of things. I'm noticing here, one good on you for crunching your numbers, I think that this is wonderful, but you're only crunching your income. Now you need to start a spreadsheet for your expenses. And once you get those two things side by side, you're really going to start to see what money is coming in and what money is going out. Or you can set up a freshbooks account. Now, disclaimer, freshbooks does sponsor the being boss podcast, and you can try it out for free@www.freshbooks.com slash being boss. But no matter what software or program you use, I think it's really important to regularly track your income and your expenses. After that, you're going to have much more of a clear picture on what's going on in your business, you're going to be able to pull some profit and loss reports, you're going to be able to really just get a good overview on cash and everything else cash flow, you'll start to be able to recognize patterns from month to month or even quarter to quarter. And so yeah, for me, it sounds like there's something going on with your expenses. If you're making decent money, but you feel poor. What do you think, Emily?

Emily Thompson 4:01
Well, she does say my expenses are definitely killing me. This is later on in the comments. Also little leaks, where I'm spending a few dollars here and there and things I don't need. And I need to get back on track with using separate accounts and actually paying myself It started out as an emergency slide of my business card here and there. And now it's getting out of hand.

Emily Thompson 4:22
All of those things. Well, it sounds like she's already identified all the things she needs to be doing. Um, I think definitely looking at expenses and getting a wrangle on those and they're really specific to do would be looking at your subscriptions, or the things that automatically come out of your account every month. That's money. That is really hard to sort of get a grasp on because it's all automated. You don't see it. It's not something you're mindfully spending every month. And sometimes you could be still paying for things that you're not even using anymore. One of the things that David does quarterly for our expenses is he goes through our subscriptions that can be You know, gym memberships, or that that app that you downloaded that you got a monthly subscription for, or magazines or anything that you're paying monthly or quarterly, going through those and revisit them to see if you are still using them and cancelling the ones that you are not. That is a place where you can have massive leaks, and your cash flow without even realizing you're doing it every single month. So every quarter or so we look at those things and go through to see, are we using this still or not? Can they be canceled? Or does it need to stay? That's, that tends to be a really big one.

Kathleen Shannon 5:37
I'm also a big fan of making more money rather than cutting expenses. So I know that Suzy Orman is like, popular for telling millennials to not go on vacation and to not buy coffees every day. But I want to make enough money that buying a coffee every day, or having a $10 subscription to headspace that I literally never use is not a bank breaker, you know what I mean? Right. And so I think that for you, Emma, it sounds like you're making good money, I wonder if you could raise your rates a little bit, it might be time for that. And it sounds like you might have the workflow and the reputation to be able to do that. So think about that, too.

Emily Thompson 6:18
Yeah, I would definitely say if you're just looking at your revenue and not looking at your profit, so you're not looking at how much money goes out of your business, like running a lean business is one in which you make a lot of money, but you don't have to spend a whole lot of money to run it. Being boss began as one of those, it's less of one of those now as we grow our team and, and have all the subscriptions to help us run all the things. But especially I think a product businesses are not lean businesses, where you do have to buy a lot of things to create the things to sell them. But if you really just as your business becomes more complex, your structure between your revenue and your profit changes. So keeping a constant eye on that, how much time it takes you to complete something, how much resources goes into, into completing them and delivering those to your client or customer, depending on what your business is. Keeping an ongoing look at that is really important because that is where you can look at your pricing, and justify if and when you need to raise it, and what that needs to look like. Because if you were to just arbitrarily go at your prices, and say, Okay, I'm gonna raise them 20%. But 20% is not even enough for you to recoup, then you're not raising them enough, knowing your numbers further than just your expenses, and your and your income and looking at things like revenue versus profit, and how it is that you can make the profit you want with, with the prices that you've set is really important. So take it, take it to the next level of knowing more about your numbers. Because the more clarity you can get around them, the more the more satisfied, you can be with them. Because another thing that I want to touch on here is that, you know, you're making decent money, but you're still freaking out. Which means a lot of this is just in your mindset as well. Knowing all those numbers gives you the security and understanding of what it is that you should be thinking. But it doesn't mean that you will feel secure. Even if you prove security, you can still be freaking out. So get really clear, come to terms with it, and maybe chill out on the freaking out.

Kathleen Shannon 8:24
Now I have to jump in here and say I've been freaking out about money lately. And I'm also reorganizing some things in how I get paid how I file my taxes, how I'm starting to track my income and expenses. It's a really long story. But basically, I'm setting up my own LLC for Kathleen Shannon. And I'm going to be setting up my own bank account. And I'm looking at this as a really fresh start to get organized. And I'm not the most organized person by nature, especially whenever it comes to things that deal with metrics, right? And so I'm actually going to be hiring someone to be looking at my books, who can run a monthly report of here's your income, here's your expenses, here's your cash flow. Here's what we're expecting on the horizon, here's how much you have to pay in quarterly taxes, and really getting organized there so that I don't have to freak out about it. Because I don't know what's happening. I'm basically paying someone else to manage what's happening. It's also good to be able to learn how to do this on your own as well, you can get a really intimate view at the health of your business. Whenever it does come to money by learning it yourself. I just know I'm in a place personally, where I don't need to learn it myself. I just need to hire it out and know that it's good. And so you might think about that as well. Emma is hiring a bookkeeper or someone to even just get you organized once and for all. And then you can take it from there. So those are a couple of other ideas.

Emily Thompson 9:50
Well, I think that's the key to is knowing your numbers. You don't know what you don't know. And it sounds like I mean just based on the language she is in this pose that sounds like Emma really just pulled this spreadsheet for the first time, first time in a long time, because she was surprised at how much she was making. So I think this is a trap that a lot of people with money fears fall into is they get so scared that they just can't even look at it. When you can't make an informed decision. I mean, both of you had said this so many times, you can't know what you don't know. And you mentioned, you know, David pulls spreadsheets every quarter for you. So even if you are freaking out, you're freaking out and informed way so you can make the steps to get out of that freaked out myth.

Emily Thompson 10:33
True that

Kathleen Shannon 10:34
Yeah, so get yourself some fresh books. We also like YNAB which is you need a budget, we I really like using mint, which is an app on my phone, it's so easy to even start automating a lot of this stuff, a lot of these accounts will hook right into your bank account, where you really don't have to think about it you just see a hop in there once a month. Also, Emma, I don't know what you do for a living. But it would also be great for you to have an invoicing system and an expense system like a way that you capture your expenses and keep track of those things. So ultimately, I'm going to tell you to get some freshbooks you can try it for free again, going to freshbooks comm slash being boss, they didn't even pay for this. We just like them so much and personally use them that I would highly recommend that for you.

Emily Thompson 11:21
Yeah, regardless, just get really, really in the know with your numbers you've definitely started which I think is obviously where it all begins. But continue to dive deeper. The more you know your numbers, the less you have to freak out about them.

Emily Thompson 11:36
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