Stony as a Washington Neocon
Stony broke. Partway through the best quarter of the year, and I suddenly realise I've got £50 in the world and am facing £250 in overdrawn fees just to make my mortgage next week. How can this happen when the calendar's full to bursting?
Here's how. Plenty of people book you up for plenty of days early in the month, so you relax slightly where your credit card's concerned. You pay for a client's sandwich, or a coffee or two. A golden rule of budgeting is 'avoid small nonessentials' - but the £20 a day they're adding up to doesn't matter when you're billing. Life is good.
Three projects. Two of them grow. Billings for a copy project turn into extra billings to whomp up the interaction model, then further billings to scare up the entire information architecture - both leading to increased scope of copy and upping my copywriting days. The single spreadsheet which describes your whole business starts to sing sweetly to you in the night. You go out to dinner, two nights in a row: the slip reads £60 each time. Hardly matters that you're maxing out one credit card, there are two others in your wallet. Just roll.
The work gets done, but the feedback phase is delayed, so you can't bill the extra days until next month. Doesn't really matter; it stays on the Sales, after all. No problem. A week later, the mortgage is due. Oops, there isn't enough in your business account to draw your salary yet, so you have to pay it by withdrawing cash on your credit card. But you've billed enough in the last two days alone to cover it, and £700 isn't really much, is it? Well, a girlfriend's flying in from Japan next month too, so you'd better put £200, £300 in her bank to cover her travel costs, all cash withdrawn from Mr Visa. £21 in fees plus added super-interest. Gotta clear that. Next week perhaps.
Halfway through the month, you take on a little extra project that includes a project management aspect. You can do it; why not bill for it? The £1000 you've got to pay upfront for campaign production doesn't seem that large when the project pays double that. In late afternoons heading home, you know you've got nothing in the fridge, so you stop off in town and head for a restaurant instead. Mmmmm. £31 buys a really good hamburger.
Rest of the week, you work frantically so you can enjoy the weekend's fun: a countryside Triathlon far from the seething crowds of London. You enjoy the hotel, dinner, even the comfortable train (take the upgrade to First, why not?) On Monday morning, a voice on your phone tells you there's a problem with your card for the energy gloop you bought on Sunday before the race. Oops. You pay the credit card with a business debit card, which increases your business liabilities due end of month. Still, no sweat. You've got lots of billings.
You enter the month's second half. One account turns into two: whoopee. The client's client you were ultimately working for wants to book something outside your immediate client's core competency; he asks if he can work with you directly. No problems. Whoooo. Ten seconds on the phone book another £500. You're approaching the absolute maximum of days it's possible to book in one month. When monthly debits peel off your personal account, you don't notice them, because you're not starting each day with a look at your financial situation. When the pure heroin of billings is coursing through your veins, the downers of daily cashflow don't get a look-in. But it doesn't matter, because your horrendous personal overdraft is smothered by the ever-increasing figure on your Sales Ledger Outstanding.
Last week of the month. You never notice how close to the edge you're skating, because your billings this month will be four times average UK household income and you feel wealthy. What you neglect is that the actual cash won't hit your business account for several months, and in the meantime you're saddled with someone else's debts as well as your own. Same applies to the VAT you've charged out (which the Revenue wants next month, even though it won't arrive with you for a month after that) and the two months' PAYE tax and NI you owe. (Of course, as a limited company you pay NI at double rates, employers' contribution in addition to personal.) You pay two months, that still leaves this month's demand lying on the desk. You'll deal with it later. There's always a later.
Oops, You notice that over a thousand pounds of your billings are just rebilled costs, not gross profit: money you've paid out for a client's project, that won't be paid to you until September. Revise the figures a bit. Try to confirm the two extra days' booking a client mentioned last week. Hmmm, it's only one day. Oh well. I take it. It's the 27th; soon be time for the mortgage to come out again. With three days to clear any payment in, and another three to transfer my salary to my personal account, I need six clear working days to make sure there's enough cash to keep a roof over my head. I have... nine days. Including a weekend. Cutting it a bit fine.
End of the month. The billings figure stays constant on the Sales Ledger; its growth from the previous month exactly matches the month's billings total, which means NOBODY HAS PAID ANYTHING AT ALL for the work I did in June, with most of May still outstanding too. So after one of the most profitable months on my books, I end the month with a few tarnished coppers in my pocket and a Himalayan pile of credit card debt. My bank fees for the month of July will be approximately £278, not far off a full day's billings. One day a month, I'm working for my bank. I persuade some pals into an at-home get together instead of dinner out tonight.
That's how it goes, sometimes, in business. The harder you work, the poorer you get. And it's happening to me now.
Here's how. Plenty of people book you up for plenty of days early in the month, so you relax slightly where your credit card's concerned. You pay for a client's sandwich, or a coffee or two. A golden rule of budgeting is 'avoid small nonessentials' - but the £20 a day they're adding up to doesn't matter when you're billing. Life is good.
Three projects. Two of them grow. Billings for a copy project turn into extra billings to whomp up the interaction model, then further billings to scare up the entire information architecture - both leading to increased scope of copy and upping my copywriting days. The single spreadsheet which describes your whole business starts to sing sweetly to you in the night. You go out to dinner, two nights in a row: the slip reads £60 each time. Hardly matters that you're maxing out one credit card, there are two others in your wallet. Just roll.
The work gets done, but the feedback phase is delayed, so you can't bill the extra days until next month. Doesn't really matter; it stays on the Sales, after all. No problem. A week later, the mortgage is due. Oops, there isn't enough in your business account to draw your salary yet, so you have to pay it by withdrawing cash on your credit card. But you've billed enough in the last two days alone to cover it, and £700 isn't really much, is it? Well, a girlfriend's flying in from Japan next month too, so you'd better put £200, £300 in her bank to cover her travel costs, all cash withdrawn from Mr Visa. £21 in fees plus added super-interest. Gotta clear that. Next week perhaps.
Halfway through the month, you take on a little extra project that includes a project management aspect. You can do it; why not bill for it? The £1000 you've got to pay upfront for campaign production doesn't seem that large when the project pays double that. In late afternoons heading home, you know you've got nothing in the fridge, so you stop off in town and head for a restaurant instead. Mmmmm. £31 buys a really good hamburger.
Rest of the week, you work frantically so you can enjoy the weekend's fun: a countryside Triathlon far from the seething crowds of London. You enjoy the hotel, dinner, even the comfortable train (take the upgrade to First, why not?) On Monday morning, a voice on your phone tells you there's a problem with your card for the energy gloop you bought on Sunday before the race. Oops. You pay the credit card with a business debit card, which increases your business liabilities due end of month. Still, no sweat. You've got lots of billings.
You enter the month's second half. One account turns into two: whoopee. The client's client you were ultimately working for wants to book something outside your immediate client's core competency; he asks if he can work with you directly. No problems. Whoooo. Ten seconds on the phone book another £500. You're approaching the absolute maximum of days it's possible to book in one month. When monthly debits peel off your personal account, you don't notice them, because you're not starting each day with a look at your financial situation. When the pure heroin of billings is coursing through your veins, the downers of daily cashflow don't get a look-in. But it doesn't matter, because your horrendous personal overdraft is smothered by the ever-increasing figure on your Sales Ledger Outstanding.
Last week of the month. You never notice how close to the edge you're skating, because your billings this month will be four times average UK household income and you feel wealthy. What you neglect is that the actual cash won't hit your business account for several months, and in the meantime you're saddled with someone else's debts as well as your own. Same applies to the VAT you've charged out (which the Revenue wants next month, even though it won't arrive with you for a month after that) and the two months' PAYE tax and NI you owe. (Of course, as a limited company you pay NI at double rates, employers' contribution in addition to personal.) You pay two months, that still leaves this month's demand lying on the desk. You'll deal with it later. There's always a later.
Oops, You notice that over a thousand pounds of your billings are just rebilled costs, not gross profit: money you've paid out for a client's project, that won't be paid to you until September. Revise the figures a bit. Try to confirm the two extra days' booking a client mentioned last week. Hmmm, it's only one day. Oh well. I take it. It's the 27th; soon be time for the mortgage to come out again. With three days to clear any payment in, and another three to transfer my salary to my personal account, I need six clear working days to make sure there's enough cash to keep a roof over my head. I have... nine days. Including a weekend. Cutting it a bit fine.
End of the month. The billings figure stays constant on the Sales Ledger; its growth from the previous month exactly matches the month's billings total, which means NOBODY HAS PAID ANYTHING AT ALL for the work I did in June, with most of May still outstanding too. So after one of the most profitable months on my books, I end the month with a few tarnished coppers in my pocket and a Himalayan pile of credit card debt. My bank fees for the month of July will be approximately £278, not far off a full day's billings. One day a month, I'm working for my bank. I persuade some pals into an at-home get together instead of dinner out tonight.
That's how it goes, sometimes, in business. The harder you work, the poorer you get. And it's happening to me now.
posted by chrisworth at 3:39 PM
2 Comments:
Man, you can make it. If not you, then who? If not now, then when?
Lobsters have no need for money because they live on the seabed. We also have a poor understanding of the concept of money, trade and commerce. We live by what we can forage for ourselves in the ocean. Become a lobster and you will no longer have money worries.
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