Cash Flow

So I’m guessing a lot of you reading this are Freelance Musicians much like myself, so we all understand the stress we go through when looking over our cash-flow.

Cash-flow is basically the amount of money that is flowing throughout your business. Some people don’t notice how their cash-flow can affect their savings until it’s too late. My advice would be to prepare some form of a budget sheet such as a cash budget or possibly an income statement. A cash budget basically breaks down your cash expenses and cash revenue so you can see where you are making a profit or loss. Income statements manage your net profit and not just your cash. It will also help to be on top with your bank statements.

 This issue of cash-flow in the music industry is the fluctuating work, am I right? One month you could be a session musician and gigging, making £4000+ but then the next month you could be busking and teaching 6 year olds how to play a C chord and only making £800. The image below is a quick little excel spreadsheet showing an income throughout the year.

This is a perfect example of how your income can differ each month.

As you can see this person is making £4,700 in April and then £600 in August – It's completely unpredictable! When you see this you may think “that's not too bad” but this is before you take away your expenses and insurance.

That's a lot of red! Even after making £18,800 we have to pay £16,300 to our good old friend expenditure, which is clearly a love-hate relationship. That leaves us with only £2,500 for our savings account, and some guitars cost even more than that.

And even though doing this can be very depressing, you have to take into consideration how much this can help you. At least if you're managing your cash-flow regularly you're less likely to be in debt and have a large overdraft to pay back.

So to sum it all up, DEFINITELY keep an eye on your cash-flow or instead of making a profit each year you could be making a major loss. Next time you see a brand new, shiny instrument in your favourite music shop's window or that weekend festival you've been dying to go to - count your pennies before you hand them over and good luck