How to Plan for Your Financial Future with Bookkeeping
Written by: Heather Pranitis
Founder and Chief Number Nerd at Numbernerd Bookkeeping Solutions
Bookkeeping is one of those business tasks that many entrepreneurs want to avoid. Creative entrepreneurs especially tend to shy away from the numbers, preferring to wait until the very last minute to get everything prepared for tax time, without fully understanding the financial side of their business. Does that sound like you?
First off, let me tell you that doing your bookkeeping and looking at your numbers doesn’t have to be scary or overwhelming. It can help you see which of your services are most profitable, where you stand financially, and create a budget and financial projections for your business. Once you commit to tracking your income and expenses and setting aside time each week to look at (and make sense of) your numbers, it can help you see the big picture of your business and plan for your financial future.
Prioritizing your most profitable services.
Bookkeeping can help you see which of your services brings in the most revenue and which incur the most expenses to deliver. (Are you paying a monthly fee for software you only use for one or two clients?) Categorizing your income and expenses will help you catch any unnecessary expenses that you can cut out, and also show where your less popular (and less profitable) services are incurring costs that aren’t justified by the revenue they bring in. When these unjustified expenses are revealed, you can easily make changes that free up your energy to focus on your more profitable offers. At the same time, this increases your profit margins and giving yourself more room for financial growth.
Are you pricing to thrive or survive?
When it comes to planning for your financial future, your pricing is one of the most important areas to pay attention to. Most pricing advice will tell you to make sure you’re covering your overhead expenses + the time it takes you to carry out the services. This is fine, but it doesn’t leave much room for growth. The key to securing your financial future is setting your pricing for long term success.
You’ll want to look at your current business AND personal expenses in order to figure out your “survive” pricing (AKA the bare minimum you can charge in order to meet your basic needs.) But you want more than just survival. You’ll need to set your prices much higher than that if you want to plan for future financial success. This isn’t just about being able to afford luxuries like travel or massages (although there’s nothing wrong with including those things in your personal budget!). This is about pricing for financial security: setting aside money for retirement, savings, business, and personal investments. Be sure to calculate how much you want to set aside each month, and include that into your “thrive” budget. You can then figure out how much you would need to charge to it those numbers. It’s ok if you can’t raise your prices to hit that thrive number immediately, but it’s good to have that number in mind so you can raise your prices incrementally until you get there.
Your Future Depends on it.
It’s easy to go through these pricing and bookkeeping exercises and dream about having the budget to plan for your financial future. But for many creative entrepreneurs, the idea of raising your prices to hit those financial goals can feel like the scariest thing in the world. What if your clients say no? What if no one hires you at your new rates? You may even be thinking things like “I don’t “deserve” to charge that much.” This is where the “cold, hard bookkeeping data” comes in. When you have a good grasp of your numbers, you can base your pricing and other financial decisions on facts rather than how you feel about raising your prices. It also helps to see how the financial decisions you make now are impacting the future you’re creating for yourself.
I know that making decisions based on numbers and data can feel intimidating and even heartless at times. But I promise you, every single creative entrepreneur I’ve worked with who have gone through this process comes out on the other side more confident in themselves, in their pricing, and in their futures.
If the idea of raising your prices or using bookkeeping data to plan for your financial future is intimidating, I want to help. Be sure to grab my free bookkeeping template + video guide that will help you make sense of your numbers, and set a solid financial foundation for your business.