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The Money Train & Allocating Cash Flow

The Money Train

It occurred to me that I haven’t written about how I manage cash flow generated from assignment work. So here it is…

Beginning in 1988, I attach a small piece of paper to my paid invoices. This paper identifies how the dollar amount is to be allocated to the various financial obligations I incur on every assignment. Line one lists the gross amount of the invoice. Line two lists the amount of sales taxes to be remitted to the California State Board of Equalization. (The friendly folks whose job it is to collect sales taxes in as many creative ways as possible.) Next up, money to be paid to labs, hair, make-up, etc. Line four is for my assistants. Line five is for expendable supplies. Line six is for equipment rentals. Line seven, for transportation costs, line eight is for income taxes (see your CPA for the correct percentage), line nine for misc. (Ya gotta love the catch-all basin that is miscellaneous!) The dollar amount left over was for my personal use. (mortgage, groceries, utilities, etc.) Big jobs generated big income. Small jobs generated little income. This plain fact compels me to push the pricing envelope on every assignment. This in turn helps me live the life I’ve planned. I’ve been lucky, successful and persistent in this regard.

It’s important to appreciate the practice I’ve described above and to adopt some method for allocating cash flow because the road to self-employment fulfillment is paved with the rotting carcasses of the unwise who took money destined for other obligations and (gulp!) had a little fun. There is plenty of time to have fun, take care of your business first and it will take care of you. The temptation to spend money destined for other obligations is great but it isn’t my money. I’m acting as an agent for the state and the monies collected must be remitted to them. Period. My other vendors trust me to pay them on time. I don’t fail them because, there are times when I need vendors to do me favors. Since they trust me, they help me.

By being militantly disciplined in allocating cash flow, I minimize surprise and stress. This discipline maximizes long-term resource growth and refines my money management skills. I’ve been at this for 22 years, I live well so believe me when I urge you to seriously consider the ramifications of developing a laissez-faire attitude towards cash-flow management.

You can do this!

Michael

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