If you've ever found yourself waiting for a client to sign a contract and write you a check, so that you can afford to pay for another client's album - you know how important is is to manage your cash flow.  Even if your business is "profitable," that doesn't necessarily mean you're rolling in cash.  At the same time, nothing will kill your business faster than being unable to meet your obligations because of a lack of cash flow.

I often hear from photographers who struggle with this very issue - in fact we spent a chunk of time talking about this very subject at my last ONE DAY INTENSIVE. If you're struggling, you're not alone.  Even better, there are a few easy steps you can take to ease the struggle.  I want to focus on two of them.

The first thing you can do to get a grip on your cash flow is to set up three separate bank accounts.  That's right, completely separate business accounts.  

1. The first one should be a business checking account.  This will be your operating account.  It will be where you deposit checks, cash, and credit card payments.  It will also be where you pay your business operating expenses from.  You will NEVER pay personal expenses out of this account (NEVER, NEVER, NEVER).  When it comes time for you to get paid, you write yourself a check from this account and deposit it in your personal account.

2. The second account is your "album account," or your "product account."  This should be a business savings account.   Anytime someone purchases something from you that you're going to have to fulfill later, you transfer the wholesale cost (what it will cost you to fulfill this product) in to this account.  That means when someone hires you to photograph their wedding, and it includes a 40 page album that costs you $500, you immediately transfer that $500 to this account.

You never make withdrawls from this account.  When it comes time to order the product, you transfer the money back to your checking and pay for it.  You don't touch this money for ANYTHING ELSE.  Not to pay your second shooter, not to buy camera gear, not to pay your mortgage.  

3. The third account is your TAX ACCOUNT.  This should also be a business savings account.  Specifically, this is for sales tax.  Not only is it a good practice to immediately transfer the sales tax you collect in to this account, most state governments would actually prefer you do it this way.  In addition, you can put your estimated income taxes in this account as well.  

You don't take money out of this account for ANY REASON other than to pay your taxes.  Many states will allow you to set up a direct withdrawl when you file your monthly or quarterly statements, and you can set those to come directly out of this account.

Some of you are thinking right now that it seems like a lot of work to manage multiple accounts, and make transfers.  In some cases it might be.  But if you shoot 20 weddings a year, you might might 20-40 transfers a year.  If each one takes you a minute - that's less than an hour's worth of work a year to make sure that your business doesn't end up "ALBUM POOR," or unable to meet your obligations to your clients and the government. 

Tomorrow, I'll talk about the second area I want to focus on - how to pay yourself.  If you'd like to have it delivered to your inbox, instead of having to come back here - simply fill out the form to the right to join the email newsletter!