Cash Rules Everything

Welcome to the first edition of "The Weekly Invoice"! In this newsletter, we'll discuss keeping your entrepreneurship alive and then excelling with wit, stories, and conversations around working ON the business. Our aim is to empower you to take space to work on your business, not just in your business. Let's dive right in!

Understanding Cash Flow

Cash flow is the lifeblood of any business, including freelance and contract workers. It refers to the movement of money in and out of your business over a given period. To illustrate, let's consider a hypothetical social media manager called "Reply Guy."

Reply Guy, like many new businesses, often faces challenges with cash flow due to irregular client payments and project delays. To overcome this, they implement cash flow management strategies such as creating a cash flow projection spreadsheet to track incoming and outgoing cash, negotiating upfront payments with clients, and using invoicing software such as Stripe to streamline payment processes.

Setting up Rainy Day Accounts

Building a financial safety net is crucial for weathering uncertainties. Imagine Reply Guy faced a sudden revenue dip due to project cancellations, market slowdowns, or seasonal issues. To handle such situations, they set up a rainy day account or an emergency fund.

By transferring a percentage of their monthly revenue to this account, they gradually build a cushion to cover unexpected expenses or revenue gaps. Setting up an automated transfer ensures consistency. For example, Reply Guy decides to allocate 10% of their revenue each month to their rainy day account. By diligently saving, they create a safety net for challenging times. Most banking systems allow for automatic transfers at regularly scheduled intervals. Start with manual transfers and then automate as revenue becomes regular.

Bonus: Dollar Cost Averaging for Investment

 Investing in the stock market can be intimidating, but daily cost averaging simplifies the process and reduces risk. Many entrepreneurs either YING or YANG with investing, putting it all into their business or supplementing their revenue with risky active trading. Instead, Reply Guy wants to invest a portion of its surplus cash into stocks.

Instead of trying to time the market, they choose to employ a dollar-cost-averaging strategy. For each payable, they invest a fixed amount, regardless of the stock's current price. This way, they benefit from the market's overall upward trend over time, without worrying about short-term price fluctuations. By automating regular investments, they can grow their investment portfolio steadily. As a busy business owner, you may not have the time or expertise for active investment management. Investing throughout the year also makes it easier to properly manage the sole entrepreneur’s income brackets during tax season. In the past, I’ve used portions of my rainy day fund to increase investing within my SEP (self-employed 401k) or an active IRA to reduce taxable income.

Spotlight on Success

Each week, we’ll spotlight a successful member of the audience, to promote each other while sharing success. To kick off, I Grady, am a fractional chief marketing officer, founder of dStaff, and investor. For seven years I’ve diligently managed my cash flow, set up (and depleted) a rainy day account, and continually invested. As a result, I am still in business, pursuing my interests in open development, breaking up platforms, and creating tools for an increasingly decentralized workforce of entrepreneurs.

While contemporaries may have earned more through direct employment during this time I’ve set and managed my business, increased billables and rate annually developing a strong base of business. I also get to do what I want, when I want, and with whom I want. This has allowed me to support 4 great kids, 3 kittens, a chihuahua, a gecko, and more fish than I’ll admit to. Finally, I’ve taken multiple vacations, including international every year I’ve been in business. (treat yo self!)

Takeaway: Actionable Tips and Tools

To help you implement these strategies in your business, here are some actionable tasks you can accomplish today:

1. Create a cash flow projection spreadsheet to track your business's income and expenses. Here is a great resource and template.

2. Negotiate upfront payments or partial payments with clients to improve cash flow.

3. Open a separate savings account for your rainy day fund.

4. Automate regular transfers to your rainy day account for consistent savings.

5. Research index funds or REITs and consider starting a passive investment portfolio. We will cover this in greater detail in future newsletters.

Conclusion: Congratulations on completing the first edition of "The Weekly Invoice"! By understanding cash flow, setting up rainy day accounts, exploring passive investing, and learning from success stories, you're on the path to financial resilience and business growth. Stay tuned for

our next edition, where we'll delve into another vital topic to help you work on your business (not in it). Remember, take action today and implement the tips provided to make a real impact on your business's financial health.

Thank you for being part of "the Weekly Invoice" community!-Grady