Last week I wrote about four potential ways that freelance writers overspend. Naturally, because we’re all dirty overspenders, the comments turned into an exultation over the joys of inhaling fresh journals in the office supply aisle and our ecstasy at purchasing that perfect, unnecessary domain name. But that must come to an end, because today is judgment day. And here’s how to catch and curb all this wild over spending you are (possibly) partaking in within your freelance writing business:
Study Your Profit and Loss Sheet
Or, if you prefer, call it an “Income and Expense Sheet.” That sounds somehow friendlier, doesn’t it? Whether you call it a P&L or an I&E, you make one by sitting down with all of your paid invoices and expense receipts over a certain defined period of time and categorizing each one. Now, you can do this on a spreadsheet or template, or let a free application like Outright.com do it for you. (Disclaimer: I do Outright’s social media, so know their service well. Please do recommend other automated P&L services you know of, free or otherwise, in the comments!)
Since this is a spending post, ignore your enormous profits for now and focus on the losses. For ease of use at tax time, go ahead and divide your expenses into IRS-approved categories like Mileage, Meals & Entertainment, Contractors and Freelancers, etc. Then have a look. Do any of these amounts look suspiciously large? Well, there you have it, you’re over spending. Did that seem way too simple? You’d be surprised how many people don’t track their profit and loss until it’s too late and a serious problem has gone unchecked for far too long.
So you spent way too much at your corner office coffee shop this quarter, what to do?
Create a Budget
I won’t insult your intelligence. You already know how to make a budget and you know why you need one. But I can suggest ways to make budgeting simpler. Try an application like Mint.com (which is intended for personal finance but will well if you separate your business and personal bank accounts). It’s a robust budgeting program that will also suggest ways you can save money on credit card fees or increasing your savings with their partnered savings accounts. There’s also BudgetPulse (also for personal finance) and PearBudget, which is looking a little dated around the edges. Or, if you prefer not to manage your money in the cloud, stick to an old standby like Quickbooks or an Excel Spreadsheet.
Keep Your Eyes on the Prize
In her book Instant Appeal, author Vicki Kunkel explains that human beings are just not good at long term goals. Like our ancestors, we live in the present, looking out for predators and our current survival needs. That’s why we choose to eat that second ice cream cone or forego that retirement plan even though we know we’re making the wrong decision. I won’t tell you to make a vision board or tattoo your goals backward on your forehead, but I do think that keeping your mind on a long term goal (vacation, retirement, 40th birthday party with gogo dancers and Wayne Newton) will help you curb the urge to buy post-its in every color of the rainbow. Personally, I take a nice long vacation every year, and the thought of caipirinhas made with real cachaça in a few months is usually enough to put me off buying some overpriced chain store latte today.
How about you? Can you recommend any easy, productive Profit & Loss generation or budgeting tools to keep your fellow freelance writers from totally succumbing to their office supply addictions?
P.S. Jones says
Analyzing my P&L makes me feel in control. (As a recovering control freak, that’s against my twelve step program, but if Lindsay Lohan can backslide, so can I) I like both Outright and Mint. I’m using Mint for personal and Outright for business.
.-= P.S. Jones´s last blog ..Yes You Do Need An Editor (And His Name Isn’t SpellCheck) =-.
Jennifer Escalona says
Hey, I’m a recovering workaholic and I started a business. If that’s not backsliding, what is? I do the exact same thing – Mint for personal and Outright for business. I love all of Mint’s charts, graphs and suggestions, and how Outright fills out my tax forms.
.-= Jennifer Escalona´s last blog ..A Few Tricky Ways to Stay Current on Business Books =-.