Sometimes I’m embarrassed to admit it but I do find all things finance and accounting quite boring. There’s a part of me that as someone who came from a learning and development background, this was one area I really never connected with my business clients when I should have. I knew it then and I know it now.
If I really took the time to understand and have a level of financial business acumen or intelligence (FBI), rather than taking a back seat when these were discussed in business meetings, I may have had a completely different perspective – one that was totally aligned with my internal business client. After all, numbers never lie. They reveal the real story behind the excuses, the blame, the denial…
So when I left the corporate world to freelance, one of my main skill gaps was to pick up my business acumen. Some years ago during my MBA studies I had completed (and thankfully, scored credits) in Financial Accounting and Micro and Macro Economics. However, to say that I enjoyed the subjects were a bit of an understatement. When I have to endure a topic I don’t like, I study it religiously so that I never have to revisit it again. The idea of failing and having to repeat a subject has been ingrained in me. This is worse than all of my fears put together because it is a waste…of…my…time.
For the last two weeks, I have been focussing on understanding business performance in terms of cashflow, profits and loss. I’ve been revisiting profit and loss statements, revenue and expenses, reading the balance sheet and determining break even points. Now for a freelancer, it’s relatively simple and I have been recording my incoming and outgoing expenses and cost of sales but I had to use a good old fashioned Excel spreadsheet (yes, also embarrassed to admit that I’m no Excel boffin as there’s never been any reason to use this program in the past).
Some people have said to me, ‘there’s a software program for that!” or “Use Xero!” or “that’s what I have my book keeper or accountant do!” but I wanted to learn this for myself simply because I had put this off too long. This is a skill that I had to pick up and I had to practice it on a real life example and one that is relevant and critical for me – my business.
My business coach gave me simple templates to use and I have been recording the data in this which then creates a variety of graphs that can instantly show my progress – and my gaps.
I had an original financial target to achieve for my first year in business (and I’m happy to say that I will achieve this target by the end of my first year of freelancing) but in my second year of business, I’d like to stretch that target.
It will mean changing some things around the types of services I provide – and more importantly, how I provide them and I have mixed feelings about this. (For example, I have many people asking me about workshops and webinar services – that is, train others to learn socially – but my passion is a more hands-on performance consulting and analysis role that gets me out there working with the business to design a customised performance solution that is relevant for them using social tools and systems that they may already have within the organisation. I think this is because I’m naturally curious and love observing people at their work and asking ‘why’ and ‘how’ they do certain things….Of course, I will still happily undertake the workshops and webinars when asked! )
However, these templates have been instrumental for me to put some figures in there and make some “guestimates” of what I can achieve.
The challenge is there’s only one of me – and my time is valuable. I can seek out more clients or change my prices or offer different services but I need to have my end goal in mind. It was never about working long endless hours for little reward – it was about making a new life where I could enjoy what I do – learn new things – and share my learning with others – and have some fun while doing it.
(Truth be told, if I could be paid to learn new things and write about them and how they can be used or applied in different contexts; throw in the opportunity to work on one-off innovative projects with a creative and a diverse team to create something that helps a community in some way – this would be my perfect job).
What I do like is that for the first time, I’m beginning to ask myself questions on how to maximise my income through simple small behaviour changes that go a long way in managing the budget and seeing the results play out in the numbers such as:
- Reduce my expenses (I have been reusing, reducing, recycling and borrowing from others more)
- Seek out discounts in every way
- Challenge my bills
- Always ask ‘is that your best price?’
- Set up payment terms for services
- Offer discounts for early payment
Some of the lessons I have learned in the last year with regards to this which may be relevant to other freelancers are:
- Have my end goal in mind (I had a first year financial goal to achieve but I now see that I have to change it but to still keep in mind the vision I had for myself and my business)
- Don’t beat yourself up over the numbers – there’s going to be some months which are below what you planned, others above
- Don’t forget to factor your own wage into it as an expense item (and draw a wage – this has been the biggest lesson for me!)
- Constantly review and question (it’s lucky my husband is an accountant and lives, breathes and eats this stuff but unfortunately the moment he starts to talk about it, induces me to sleep – maybe this time, my ears are pricked up because all of a sudden, it’s become relevant for me).
What do you think? Do you need some FBI in your life?