Freelance Finance – How to Carry Out a Monthly Business Review
Keeping on top of the numbers in your business is one of the most important things you can do as a business owner. A lot of freelancers find themselves ignoring or putting off their finances in favour of client work. They often think that whilst they’ve got enough money coming in to make ends meet, tracking the figures isn’t a priority. But this is where you’d be wrong.
Whether you’re the CEO of a large multinational company or the boss of your one-(wo)man band, having a clear overview of your figures and knowing where your business is at is essential. This is what allows you to make strategic decisions so that you can keep developing your business to ensure it supports you in the long term.
In my annual Reflect and Reset Challenge, I help freelancers monitor their business’s performance, assess their results, create solutions to problems they’d identified and set new goals. But while an annual review is a great thing to do, once a year simply isn’t enough. I always recommend looking at your finances on a weekly basis, but if you can’t manage that, monthly check-ins are a must!
Monthly reviews allow you to follow your progress and adjust your course to make sure that you achieve your goals and have a successful business that works for you in the long run. So with this in mind, in this blog post, I’m setting out seven key steps to help you carry out a review of your business finances on a monthly basis.
What to assess in your monthly business review
1) Keep track of your financial goal for the year
When doing an annual review, I suggest you set yourself one main financial goal and one main non-financial goal for the coming year. This is then the first thing I would recommend you look at during your monthly reviews.
If you set yourself the goal of reaching a certain turnover by the end of the year, for example, monitor this each month. Look at the difference between where you’re at and where you want to be. How much do you need to sell in each of the coming months to make sure you hit your goal? If you need to increase your sales, get creative and figure out where the extra income will come from!
2) Keep track of your non-financial goal for the year
The same goes for your non-financial goal. Look at the progress you’ve made and get clear on what you need to do to make sure you reach your target.
Let’s imagine you’ve decided that you want to limit the number of evenings and weekends you end up working. Perhaps you don’t want to go over a total of 50 evenings or weekend days worked over the course of the year. If that’s the case, record how many you’ve worked that month and work out how many you have left to split between the remaining months of the year. If you’re finding that you need to work more evenings and weekends than you’d like just to make ends meet, that’s probably a sign you need to put your prices up.
3) Track the hours you’ve worked and do something with those numbers!
One of the first things I get my mentees to do is to track their hours and the kind of tasks they’re working on. Although you can understand a lot just by doing this, it’s really important to then use the numbers to your full advantage.
Total up how many hours you worked during the month and then calculate how many of these hours were spent on paid work. These figures can be really eye-opening! First of all, are you happy with how many hours you worked? Would you like to be working more or are you perhaps working too much? If you’re not happy with the numbers you’re seeing, ask yourself what you can do to rectify the problem.
Instead, when it comes to the amount of time spent on paid work, I usually find that this is one of the things freelancers overestimate the most. If you discover that you’re managing fewer paid hours than you originally thought, check you’re earning enough to make a decent living. If you aren’t, you should take corrective action, and it might be time to consider raising your rates. In my Charge with Confidence programme, I help participants understand exactly how much they need to be charging so that they can live comfortably.
4) Get on top of your invoicing
Once you’ve figured out how much time you spent working on client projects, make sure you get paid for it. Send any invoices that still need to be issued for the month and make sure you keep track of those you’ve already issued as well. If you come across any overdue payments, chase them up!
5) Record all your business expenses
While understanding how much you’ve earnt is crucial, it’s also important to know exactly how much you’ve spent. It’s so easy to put off recording your business expenses - after all, they aren’t going anywhere! But by failing to keep on top of them, you risk forgetting about them and missing out on tax relief, as well as potentially spending more than you have available.
When you’re carrying out this task, don’t forget to look ahead to the coming month to see which expenses are due to go out. Do you have enough money in your account to cover them? If you’d like some help managing your business expenses, download my free business budgeting spreadsheet and start there.
6) Check in on your income and expenditure
Income and expenditure don’t always happen straight away. You might have to wait for invoices to be paid by customers, and if you’ve paid for something using your credit card, it might be a while before the money goes out of your account. Look at your business accounts and record what has actually come into and gone out of your business this month. It’s important to keep on top of transactions in case there’s anything untoward or a transaction you were expecting hasn’t gone through.
7) Assess your profitability
The final task involves taking these figures a step further and analysing how much of what you earnt was profit. You can do this by calculating the total amount you invoiced for the month minus any expenses. Then, you can go even further by figuring out your profitability per client. Take the amount you earnt on projects for a specific client and divide it by the total number of hours you spent on work for them.
These numbers are key because they allow you to see if what you’re doing is sustainable. Are you making enough money overall? And are there any clients that aren’t worth the amount of time you’re investing in them? If so, perhaps you should consider increasing your rates with them or looking for new customers.
Once you’ve obtained all these figures, make sure you analyse them. Ask yourself if you’re happy with the results and if there’s anything you need or want to change.
This is why carrying out a monthly business review is so important. If your business is going off course, it gives you the opportunity to steer it back on track before you get completely lost or fall too far down a rabbit hole you can’t find your way out of.
If you’re struggling to know where to start with carrying out monthly reviews for your business, you might find my Weekly & Monthly Financial Task Checklist to be useful guide. Click the button below to download it for free!
Hi, I’m Susie
I mentor freelancers on pricing so you can earn a decent living doing what you love.
I’m a translator, editor, chocoholic, crochet addict, animal lover, and budding gardener (get it?) who loves empowering others to achieve their goals.
