ABMP Financial Literacy Series
In our first column of the Mind Your Money 2020 series, we covered how to track the money coming into your massage business.
Now that you’re feeling boss-like and powerful, seeing that income recorded in one place, the next logical step is to get familiar with the money flowing out of your business in the form of expenses. Organized, honest tracking of your expenditures is key to truly understanding and being in control of your business finances. A clear view of your expenses will help you decide whether you need to make more money, lower those expenses, take a vacation, or all (or none) of the above.
Tracking expenses can be a little less fun and a little more work than tracking income . . . until you get a system in place. Once you’re rolling, tracking expenditures and paying bills should take less than 30 minutes every week or two.
Getting started can be a bigger task. So, for this first step, set aside an hour or two—whatever works best for your schedule and style. We’re going to get organized and get a real picture of how much money is leaving your massage business. By tracking our past expenses, we can better predict and plan for what will come up. This will help you build a flexible system to cover the heating bill in the cold months and buy your favorite sheets in bulk when they go on sale.
If you are already using software or another method to track your expenses, well done! Now is a great time to be sure you’re caught up on this year’s recordkeeping.
If you have not been tracking expenses regularly, it’s time to gather some information to get started. This could mean finding bank statements from your primary business checking account or downloading the account history in a spreadsheet format. If you’ve been paying business bills and purchasing business items from personal accounts or with cash, gather your paper receipts and any other records you can find.
In a perfect world, you would have six months of expense records. But we don’t live in a perfect world, so just gather whatever you can without stressing out about it. If your records are a mess and you can only find the last month of receipts, that’s OK. Start where you’re at.
Begin with a List or Software
Make a list of all your business expenses. You can use paper and a pencil, or make a spreadsheet if you prefer. We’ve created a list of common categories and a downloadable spreadsheet. (And we’ll demonstrate this in the companion video!)
I’m a big fan of very simple and affordable software (like Quicken or Banktivity, which is what I use on my MacBook) that looks and acts much like an old-school check register. There are also some web-based options like Wave Accounting. If you have a small one-person massage business, you probably don’t need complicated software like QuickBooks. But if you go that route, I encourage you to have a bookkeeper help you set it up and learn how to use it.
It really doesn’t matter what method you choose, just get started. Scan through your statements and receipts, and record every expense and the amount. Group (categorize) expenses together loosely. Don’t get caught up in being perfect. Just get the information organized as best you can.
Total up each category, and take a few minutes to consider each. Are there any surprises? Maybe you’re spending more than you expected on continuing education but less than you thought on oils. Maybe you’ve paid yourself more than you realize or nothing at all. Try not to judge your expenditures, just see what they are, as they are.
Embrace the Learning Curve
Back in massage school, your first effleurage was probably awkward and a little frustrating. Just like hands-on techniques, learning new business techniques takes time and patience.
It may seem daunting at first to get a handle on your cash flow, but once you get in control of your money, it feels amazing. The peace of mind that comes with knowing where all your money is going is priceless.
In our next column, we’ll tackle cash flow management, including how to handle income and expenses, how to pay yourself, and how to pay your bills—like a boss!
Allissa Haines and Michael Reynolds can be found at www.massagebusinessblueprint.com, a member-based community designed to help you attract more clients, make more money, and improve your quality of life.