Wednesday, August 15, 2007
Cash Flow 101
Inside every successful photographer there's a successful businessperson. One of the most important aspects of making a living in this field is managing your resources to keep your cash coming in.
I don't subscribe to the notion that artists should be starving—unless, of course, that's your look. But beyond that, the market concepts that shape the most successful businesses in the world also can shape the business that we build as photographers. Understanding primary concepts like cash flow can go a very long way to adding some bucks to the bank account.
The idea behind cash flow is essentially managing your cash so you can keep more of it to operate and grow your business. The key is keeping a mind-set that you're always trying to build more wealth than you had yesterday. Sounds obvious, right? But there's more to successful cash flow than simply making sure you have more today than you did yesterday.
Now, if you're about to put this article down because you have debt instead of wealth, don't. A critical part of business growth is understanding debt. This includes having the knowledge of the nasty little tricks that credit card companies employ to separate you from your cash, as well as utilizing debt to make you profitable.
Waste Not, Want Not
This year, the credit card industry will make $16 billion in penalty fees. If you've ever paid a $29 fee because of a late payment, then you added to that profit pool. Additionally, the credit card companies have taken to increasing your interest rate if you pay any of your bills late. The practice is called “universal default penalties.” Simply put, if Bank A reports my late payment of its Visa credit card to the credit bureau, Bank B will get wind of it and probably hike the interest rate of my MasterCard. The practice is frustrating, but legal. A lesson to learn earlier rather than later is that there's no way to outwit the credit card companies, but if you're smart, you can take advantage of them to aid you in the efficient running of your business.
Most local businesses with which you set up an account won't ding you with late fees. The secret is to pay on time anyway. This puts you in a fantastic position to ask for the occasional discount as well as getting a positive and quick response for increasing your credit line when you land a really big job. Although it may seem daunting to manage those bills, it's not.
Make a list of all of your monthly bills. This should include labs, photo rental houses, business and car insurance—everything. Next, determine all of the payees that have the ability to automatically charge your credit card each month for their payments. Most major vendors, utilities, labs and rental houses are happy to do this. Give them a credit card number that's connected to an airline rewards program so you can earn travel points as you're paying your monthly expenses.