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.
You've just consolidated many payments into one. You've also made a significant step toward savvy cash flow management. A rental house will usually charge your credit card about 30 days after the rental. Then, depending on the billing cycle of your credit card, you'll have another 20 to 30 days to pay off the charge without accruing interest. That's a total of 50 to 60 days of free money as well as the added benefits of building a solid reputation by keeping your local vendors happy, increasing your credit rating and accumulating airline miles toward the vacation that I'm sure you're going to need after finishing this article.
The absolute key to all of this is to pay off the credit card. As soon as you start paying interest, you negate the benefits I listed above.
For the rest of your bills, utilize the online payment Website offered by your bank. By the time you're done, you should have all of your recurring bills being paid automatically. Some bill payment sites like Paytrust (www.paytrust.com) actually will give you a mailing address for all of your vendors. Based on your instructions, the service will pay all or part of each bill that comes in. The important thing is that you're paying on time and not paying late fees—ever.
Another hidden interest rate that many people don't consider is car and business insurance. Because I live in Los Angeles and have had a few roadside discussions with the highway constabulary, my insurance is high enough that paying it off monthly seemed like an attractive option—that was until I read the fine print. If I pursue monthly payments, I get charged 19% interest per year, an amount that makes it worthwhile to pay the annual bill all at once or within two or three payments. The same goes for my business insurance; it costs me bucks to pay monthly.
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