Tips for Business Travellers

In a former life, I spent more than twenty years working internationally. I spent more time in airports, railway stations and hotels than I did in the office. If you are one of those people for whom travel is part of the working day, here are a few tricks I learned along the way to make the experience a more positive one.

You MUST Read This? I Don't Think So

I came across an astonishing outburst on Facebook the other day. OK, so this is Facebook, where astonishing outbursts are two a penny, but this one took my breath away.

In scrolling down my wall, I noticed a post in capitals. [Now, I used to write all my email subject lines in capitals, which I thought gave them emphasis, until a business colleague pointed out I was considered to be shouting, so I stopped.] This post was one of three from an author [whom I’m not going to name] informing her followers that unless they not only read her blog posts, but commented on them, she was going to unfriend them. She’d had it with ‘hangers-on’ and they could ‘take a hike’!

As a writer myself, I know where she’s coming from and can understand her frustration. I’ve written blog posts that have included questions at the end; I’ve sat waiting for responses to flood in (although even a trickle would be nice); I’ve wondered if the deafening silence means people hate what I’ve written, or just aren’t interested enough to respond, or haven’t actually found me in the crowded blogosphere.

But as a business woman I was horrified. Writers rely on readers and potential readers not only for primary sales, but unbiased book reviews, recommendations and repeat sales. John Wanamaker, one of the early proponents of marketing is believed to have been the originator of the phrase: "Half the money I spend on advertising is wasted; the trouble is I don't know which half." The same can be said of any marketing or promotional activities. We just don’t know how effective anything we do really is. But I think it’s a safe bet that telling people to go away if they’re not reacting the way we want them to is NOT a good promotional tactic.

I was also shocked by the rudeness of the messages. I do not know this author personally and do not solicit links with unknown people; therefore the only way I could have ended up on her list is through responding to a request from her. So, she invited me into her world in the first place. Now she was threatening to expel me because I didn’t behave exactly as she required. Result? I posted a polite message pointing out why I thought her approach was wrong — and left.

Writers write for many reasons: for ourselves, for family, for other people, for fame, for fortune [good luck with that one!] but often, just because we have to; the words won’t stay in our heads any longer.

No-one has the right to demand anything of readers. So while I hope lots of people read this post and it would be nice if some of you leave a comment afterwards, I promise I won't shout at you if you don't!

Business of Writing: Sources of Advice

[No sooner has November (and NaNoWriMo) faded into history than we are in December and the long, slow run up to Christmas. Except that it's not slow at all. In my town, as in many others, the season started with the Advent Service yesterday and swings into full action with the Christmas Fayre and lights switch-on this Thursday, an event with which I'm heavily involved and which is taking up rather a lot of time at present. So I hope you will forgive a slight rehash this week, especially as this is a topic of great importance to many writers (and other small business owners as well).]

All businesses, whether limited companies, partnerships or sole traders need legal advice on occasion, for example when we are setting up our business, signing contracts or drafting our wills. The obvious option, and one that many businesses will use, is to engage a lawyer.

However, that is not a low-cost solution and there are alternatives that can be explored. There is the Business Link helpline which provides a quick response service for simple questions about starting or running a business or a more in-depth service for complex enquiries. There is the Citizens’ Advice Bureau which would be able to provide support to individuals, but probably not to limited companies. Or there are business support organisations like the Federation of Small Businesses which provides members with legal and financial advice. As writers, we have our own support via the Society of Authors which can help members with queries relating to the business of writing. Services include the confidential, individual vetting of contracts, and help with professional disputes.   

I’ve often found the answer to a query on the HMRC website, but there are also helplines that deal with specific questions, such as the New Employers Helpline, the New Self Employed Helpline, the Self Assessment Helpline and the VAT Helpline. These numbers can be found via a quick internet search.

So whatever our query or problem, there will be someone who can help us, either for free or as a paid service, depending on the circumstances. It’s worth being aware of all these services, so we can call on them rapidly if we need them.

What sources of advice do you find most useful? What would be your first port of call if you have a legal query?

Too Busy To Write?

I am lucky enough to write for a living. It’s my full-time job. So that means I have at least thirty-five hours a week when I can be sitting at my lap-top turning out stunning prose with which to impress my readers, right? Wrong!

Firstly I have to make time for the other writerly activities like research, editing and reading (and yes, reading is definitely part of a writer’s working day). Then there are the business-related activities like writing proposals, preparing invoices, paying bills and doing the monthly accounts. There’s that huge millstone that is marketing and sales (one that all writers, especially indie authors, will recognise). And all this is before I even think about the personal, home-related and community-related activities on my monthly To Do list. If I manage to reserve twenty hours per week for new writing, I feel I’m doing well.

Please don’t think I’m complaining. I love my job; I love my lifestyle - and I know I have it far easier than anyone who’s writing while holding down a ‘proper job’. But I wanted to illustrate the importance of yet another aspect of a writer's Business Skills Toolbox: time management. I’ve talked about time management previously, but this time I'm going to discuss a specific tool: the Urgency versus Importance matrix.

 

When I was studying for my MBA at Cranfield, many years ago, it used to amuse us how many things could be expressed in the form of a 2 x 2 matrix. But it is a great way to illustrate concepts easily.

Like all organised people, I have a detailed To Do list (well, several actually) which rules what I do each month. However, sometimes the number of items on the list can become overwhelming and that’s when I turn to the Urgency versus Importance matrix.

All tasks can be categorised in terms of their degree of urgency and their level of importance to the individual. Something is Urgent if it needs to be done now; something is Important if it contributes to a long-term goal. The two are not necessarily synonymous. Once tasks have been categorised, the strategy for deciding in which order to do them is relatively easy to determine.

Urgent and Important: A call comes in from an editor looking for an article NOW to fill a hole that’s just appeared in this week’s paper. It’s a paper that pays well and could provide lots more commissions in the future. Strategy: Do It Now

Non-Urgent and Important: The corrections for the latest manuscript arrive with a request from the publisher to complete and return them within two weeks. A conservative estimate shows there is two days work required. Strategy: Schedule It For Later On

Urgent and Unimportant: A friend or relative makes a habit of phoning during the mornings ‘for a chat’ even though this is prime writing time: Strategy: Delegate It (in this case by use of an answering machine)

Non-Urgent and Unimportant: A new game is doing the rounds on Facebook and a number of writing buddies are sending invitations to compete with them / feed their cows / send them gifts. Strategy: Don’t Do It

This tool is variously attributed to Stephen Covey and to Dwight D Eisenhower. Covey certainly formalises the tool in his book The 7 Habits of Highly Effective People but it is predated by the well-known quote from Eisenhower: What is important is seldom urgent and what is urgent is seldom important.

There are a number of formal methods for employing this tool, including templates and apps; personally, I just use the spreadsheet on which my To Do list is prepared.

I'd love to hear how other people find their way through a To Do list that threatens to overwhelm and inhibit. What tools and tips do you use?

Planning a Writing Project

Writers are creative people; we work when the muse visits us. We don’t have to worry about working to timetables or plans like people with ‘proper’ jobs. Right? Wrong! Whether we are writing an article that has been commissioned for a particular edition of a magazine; a short story for a competition; or a blog posting that’s due on a Monday (!), we all work to deadlines most of the time. Even those of us who are writing our first novel, without the pressure of a contract and an agent breathing down our necks (and wouldn’t that be a nice pressure to have to deal with?) will probably have a milestone we are working towards.

So we all need plans at one time or another, especially if we know the time we have is limited. I use simple Gantt charts for my planning, starting at the end and working backwards.

Let’s imagine we’ve been commissioned to write a book about how WWI impacted on our home town/village. The original author is no longer available and we’ve been asked to step in at this late hour. There is a clear deadline for publication: 28th July 2014. There will be no negotiation on that date; it’s been set in stone for 100 years. We need to work out how long we can spend on research and how long on writing. So let’s start by running through the stages of the project and working out which ones are fixed and beyond our control:

·        Research; photos & maps; interviews

·        Drafting

·        Writing

·        Editing & proofing

·        Copy deadline

·        Printing

·        Cover design

·        Pre-publicity and marketing

We know that printing will take one month; so the copy deadline is fixed at the end of June. If we allow 2 months for editing and proofing, that takes us back to the end of April. So we know we have six months for all the research, drafting and writing. How we plan those six months depends on our style of writing. Some writers can do the two activities in parallel; others need to have all their notes and research in place before they start. Personally, I’m in the latter group and would probably devote three months to research and plan to start writing at the start of February.

The last two activities are shared with other people and can be done simultaneously with the main project.

So our Gantt chart would look like this:

You can buy commercial software packages that do this for you, but I find a simple spreadsheet works just as well.

This is how I plan many of my projects. What sort of planning methods or tools do you use?

Another Change of Direction

I've been trying out a few different approaches to this blog over recent months. Firstly, I finished my year-long series on Writing as a Small Business. This was partly because I ran out of topics; there are only so many things that can be dealt with by a non-accountant, non-lawyer - and it gets boring to continually read (or write) "if in doubt, consult a professional". Also, I wanted to pull all the articles together into a 'how-to' book; and that's my December project (October being sort out the novel in time for a competition deadline and November being NaNoWriMo). And I wanted to widen my topics so I could talk not just to other writers, but to non-writing readers too.

 

Next, I started posting snippets of new prose at the end of each Monday's blog.  I know there's a huge debate on whether writers should give away their work for free or not (and I'm not going to go there today), but I also know free samples are a tried and tested method of marketing in other industries, so I thought I'd give it a go. However, that didn't work too well, as each post ended up way too long. So, I moved my new prose to a Thursday, keeping the Monday slot for factual posts.

 

 

And then I ran out of things to talk about. You might say I was stumped for ideas!  Actually, that's not quite true; as anyone who knows me will confirm, I can always find something to talk about. But something interesting that other people might want to read - well, that's a different matter.

 

So I did what I always do when I'm uncertain of the way forward: I wrote myself a plan!  I plan to post a different type of blog each Monday of the month, which meant sorting out four different types (and an extra one for the occasional month with five Mondays).

 

And here's the new schedule:

• First Monday: The best ...
• Second Monday: An interview with...
• Third Monday: My thoughts on...
• Fourth Monday: How to...
• Fifth Monday: My top ten..

I hope you're all impressed at the thought that's gone into this plan. I'm particularly excited about the interviews I've got lined up between now and the end of the year. I've tried to come up with some interesting questions and will be introducing a range of people from different walks of life, not just writers (although they will feature quite heavily of course).

 

***

 

But today's the first Monday in the month (OK, in most parts of the world, it's actually Tuesday, but somewhere, on a remote island just this side of the international date-line, it's possibly still Monday) so, here are my nominations for three of the best bloggers for writers.  

 

I always read Molly Greene. Molly describes herself as a author, blogger, blogging specialist and coach. She blogs weekly with an emphasis on advice to indie authors. If you hate new twitter followers who send automatic DMs urging you to like their FB page/subscribe to their website/buy their book, then you might enjoy 10 Tweets You Should never Send and, like me, consider sending the link to anyone who commits any of the 'sins' listed. Alternatively, if you read her article on 101 Fabulous Blog Topic Ideas, you will recognise just where my shiny new plan came from.

 

Anyone who reads my snippets of new prose will recognise the name Morgen Bailey. Morgen's writerly activities are so widespread, they run into six lines of menu, including online writing groups, critiquing, book reviews and competition lists! I regularly use her daily writing triggers for my warm-up exercises and find them particularly good for flash fiction.

 

My third blogger is author Matt Haig, who posts periodically on a variety of topics addressed both to writers and readers. Recent non-writerly posts have included a moving piece on depression, What Doesn't Kill You Makes You Weaker and the self-explanatory The World (A Rant). But my main reason for putting Matt on this list is recent his post on 30 Things to Tell a Book Snob. I particularly like numbers 3, 17 and 19. I'm sure you all know people who would benefit from reading that post. I know I do!

 

So who would you nominate as 'best blogger for writers'?

Who You Gonna Call? The Professionals

Last week we talked about informal networks and especially the support we can get not just from the writing community but also from other small businesses. Today, we’re going to think about the support we might need from the professionals.

When we talked a while ago about financial matters, emphasis was placed on simple, appropriate systems and preferably low-cost options for our business. However, it is very likely that we will need to use an accountant at some point, especially if we have a limited company. Accountants, or should I say accountancy firms, come in all shapes and sizes, from the local one-man/woman bands to the larger practices with many partners. In general terms, the smaller the practice, the lower the cost, but also the more narrow the expertise and experience available. When we started our company more than twenty years ago, we used a small local accountancy firm. It was simple, like our affairs. However, as the business grew and moved into more complex areas of finance (just how do you deal with a tax demand from Kazakhstan?) we moved to another practice with more partners and the right experts for our business. It is most important that our accountant (or indeed anyone else we turn to for advice) understands our business.

As well as financial support, we may well need legal advice on occasion, for example when we are setting up our business, signing contracts or drafting our wills. The obvious option, and one that many businesses will use, is to engage a lawyer. However, that is not a low-cost solution and there are alternatives that can be explored. There is the Business Link helpline which provides a quick response service for simple questions about starting or running a business or a more in-depth service for complex enquiries. There is the Citizens’ Advice Bureau which would be able to provide support to individuals, but probably not to limited companies. Or there are business support organisations like the Federation of Small Businesses which provides members with legal and financial advice. As writers, we have our own support via the Society of Authors which can help members with queries relating to the business of writing. Services include the confidential, individual vetting of contracts, and help with professional disputes.   

I’ve often found the answer to a query on the HMRC website, but there are also helplines that deal with specific questions, such as the New Employers Helpline, the New Self Employed Helpline, the Self Assessment Helpline and the VAT Helpline. These numbers can be found via a quick internet search.

So whatever our query or problem, there will be someone who can help us, either for free or as a paid service, depending on the circumstances. It’s worth being aware of all these services, so we can call on them rapidly if we need them.

***

I posted my first article on the Business of Writing exactly a year ago. Today, I am finishing the series (at least for the time being). We’ve talked, among other things, about setting up a business, selecting the right business structure, writing our objectives and designing our financial systems. I’m going to put the whole series of articles into an ebook, which will be out later this year. I will also be presenting a short course on the business skills toolbox at Swanwick Writers’ Summer School next month. But for now, it’s time to get down to business and for me that means writing more short stories and flash fiction, while holding my novel’s hand while it takes its first steps into the big wide world that is Agent Land. Maybe I’ll meet some of you on your journeys?

Who You Gonna Call? Informal Networks

I’ve just returned from a packed weekend at my first Winchester Writers’ Conference. This event, which has been running for the past 33 years, was the brainchild of the wonderful Barbara Large, who has just stepped down from her role as Director (although we got the feeling she wouldn’t be disappearing completely from the scene).

The weekend was a mixture of master classes, short talks and the brilliant one-to-ones, the opportunities for delegates to spend time in front of agents, publishers or authors, pitching their latest work in progress. There was anticipation, there was relief, there was laughter, and there were tears. But whatever the emotions we felt as each fifteen minutes slot was finished, we had been given the opportunity to learn from the industry experts.

And that’s the topic we’re moving on to next. We’ve identified our business objectives and made our plans; we’ve decided on our business structures; we’ve set up our financial systems; we’ve even done a risk assessment (well, we have done that after last weeks’ posts, haven’t we?). We’re now going on to think about our support network — and we all need one of those.

Next week, we will look at the professional support structure and think a bit more about the experts we might need to consult in running our businesses. Today, we’re going to think about another aspect: our informal networks. If there is one memory of Winchester that is stronger than any other, it’s the sight and sound of hundreds of writers talking, swapping notes, and learning from each other.

Writing is a lonely business! We spend hours hunched over a notepad or a keyboard, often staring at acres of white space; and when the page or the screen is full of words, we look at them and wonder if they are any good or whether we’re wasting our time. At other times, with our business hats on, we stare at the spreadsheet, the cash book (or the carrier bag full of receipts) and try to work out what it all means (and why we’re doing it)? In most businesses, there would be other people we could talk to, performance standards to measure ourselves against, even rules and regulations we could follow. But, our business isn’t like that. And there will be times when it will all seem too difficult to carry on. But it’s our business! We can’t just stop doing it — or at least, we shouldn’t!

So we need a support network, and the best place to start looking for this is online. There are many established writing communities on Facebook, Twitter, LinkedIn, Google+ (and any other network we might be using). And the beauty of social media is that if we can’t find what we want — we set it up for ourselves. Whether we think we will get support from old college friends, from business people in our own town, or from someone across the world, it’s all possible via the internet. [In fact, I’ve been chatting, I mean talking business, with a friend in Australia just this morning.]

When I started my small business more than twenty years ago, the internet wasn’t available — at least not for ordinary people — so all our networking was done face to face. Even today, when we are all connected and online (some of us far more than we should be!), it’s still good to get out there and talk to people. A smiley face is no substitute for the real thing.

Remember we are business owners, and as such, some of our problems will be shared by people in totally different fields of work. Most towns have general business networks, whether they are called business guilds, chambers of commerce or something more fanciful. For example, I am a member of the wonderfully-named Ladies Do Latte, a group of 400+ business women across the South West of England. Networking groups provide the opportunity to pick the brains of people who will have the same business issues as us, even if their product or service is totally different. And of course, there is always the chance of picking up new projects while chatting to someone over breakfast or lunch.

Local writers’ groups are great for helping to improve our writing craft; for critiquing; and for finding like-minded people to share a stall at a book fair; collaborate on a writing project; or act as beta readers. But, there are many other opportunities for writers to get together, whether that’s via national organisations such as the Society of Women Writers and Journalists (SWWJ) and the Romantic Novelists Association (RNA) or more regionally-based ones such as the West Country Writers’ Association (WCWA). All these groups have meetings, which range from annually to monthly. The London Book Fair has traditionally been an industry event, focussed on the agents and publishers more than the authors. However, with the growth in indie publishing, this is becoming another useful place to meet people.

I started this post by talking about the Winchester Conference. There are a number of other such events running throughout the year and I’m going to finish by giving a plug for my particular favourite, the Writers' Summer School at Swanwick. This runs for a week during August, has been doing so for the past 65 years and has a dedicated ‘family’ of writers who attend each year, who are very welcoming to any ‘newbies’ and are always willing to help with problems anyone has, either with the craft of writing or with the business side. Of course, I might be biased, as I teach The Business of Writing at Swanwick each year, but if you are looking to spread or set up your informal face-to-face network, then a conference is a great way of doing it. I look forward to meeting some of you there.

Risk Management

All businesses are subject to risk and our business as writers is no exception. These days, risk management has become a huge topic: the subject of whole books; the purpose of entire corporate departments; and the originator of reams of documents and forms. However, that’s not the approach we’re going here.  We’re just going to think for a while about possible risks and how we would deal with them. Once we’ve done that, we can forget all about it. If the risks never materialise, we’ve lost maybe an hour or so of our time. If the worst does happen, we will know what to do and will be less phased by the problems, whatever they may be.

Risk management is actually a three-part process; whatever our business, risks have to be identified, assessed and managed. In our writing business, they might include:

·       risks of under-resourcing

·       health and safety risks

·       credit risks

If we work on our own, and we get sick or we have too many projects to complete (and wouldn’t that be a nice problem to deal with?), we could lose customers through being unable to work.  What about the situation where two important book fairs are scheduled for the same day. We can't split ourselves into two. These are risks of under-resourcing.

There is the risk we might be injured on a customer's property or a customer might be injured on our property.  These are health and safety risks.

There is the risk that our customer might default on payment.  This is a credit risk.

 

As business people, we need a risk management process for two reasons:

·       We think about potential risks in advance and put contingency plans in place, allowing us to get on with business, without worrying about things going wrong.

·       It may be a regulatory requirement, especially health and safety risk assessment and government or local officials may wish to see evidence of our risk assessment process.

Enterprise Risk Management Process

With so many different types of risks to consider, it is not necessary to address each one in a different way.  What is required is an enterprise risk management approach, where risk management becomes part of 'the way things are done around here'.  We have a generic risk assessment process, flexible enough to fit all circumstances and a simple risk assessment form covering the four stages of the process (and when I say simple, I’m thinking of a blank piece of paper on which we write down our thoughts and conclusions; it really is that simple).

Stage 1: Checking for Hazards

A hazard is a reality — something already existing.  Cables stretched across the floor; a dangerous chemical used as part of the job (and yes, I know the most dangerous chemical a writer works with is probably typex, but bear with me; it’s just an example!); or a customer who is having financial difficulties. Each of these is a hazard we might come across.

Stage 2: Identifying Risks Associated with Those Hazards

A risk is something that might happen.  Someone might fall over the cables; chemicals might splash in someone's eye; the customer might go bust before paying our bill.  They are possibilities, not certainties.

Stage 3: Assessing Probability and Severity

Probability deals with how likely something is to happen.  If the cable is at the front of the office and people are continually walking through the area or across the walkway at a busy book fair, the probability of someone falling over them is greater than if they are in a back office or behind a stall where people rarely go.

Severity deals with how bad are the consequences of a risk becoming a reality.  If someone gets a paper cut from one of our books, the severity is low (although paper cuts do sting, don't they?). On the other hand, if a chemical splashes in someone's eyes, it could blind them or at least stop them working for a time, so the severity is much higher.

Probability and severity are considered separately, since they are independent of each other. For example, the severity of chemicals splashing in someone's eyes is high, but the probability is much lower in our writing business than in a chemical factory (and now you see why I needed that example in my list). If we were running the factory, we would need to install eye bath stations, or maybe even showers, against the risk of chemical burns. in our writing business, that's not a measure we're likely to have to take. Having said that, it's important to make sure the top is tight on the typex bottle before giving it a good shake.

Stage 4: Avoiding, Eliminating or Mitigating Risks

Once we know the size of the potential problems, we can decide what to do about them.  We might decide that the cable should be rerouted or a sign be put up to warn people to be careful (avoidance of risk).  We would ensure that anyone working with the chemical wears eye protection (elimination of risk).  We might take out insurance against defaulting customers or insist in payment in advance (mitigation of risk).

Example

As writers, one of the greatest risks we have relates to storage of our files. After all these files contain our work in progress, our finished products, our orders, our financial records; in fact pretty much everything we need to run our business. So let's do a quick risk assessment.

 

A hazard could be that we store all the files relating to our business on one single computer or laptop. That is a fact.

 

A risk would be that the computer suffers a fatal break-down and all our files become corrupted or lost. That is a possibility.

 

The probability will depend on a number of factors such as the age of the computer, the storage method we are using or the nature of the computer problem.

 

The severity of the problem is such that I can feel you all shuddering from here!

 

So how do we manage this very real risk to our business as writers? It's highly unlikely that we can eliminate the risk altogether. Computers do break down, often at the most inconvenient time. I lost my machine some years ago, just a week before I was due to deliver a manuscript to my publisher. It was at the time when we were migrating from Word 2003 to Word 2007; the whole look of the thing changed and I needed to learn how to use the new software while finishing the final edits. It was not a good week! 

 

So if we can eliminate, we must mitigate or avoid the effects of the risk. That might be by using an external drive that can be removed from the machine and stored elsewhere; by making multiple back-ups regularly; or by using a cloud-based storage system like Drop Box. Once we have these systems in place, and we know they are working well, we can forget about them until or unless the worst happens. And if it does, it will be a mere inconvenience, rather than a disaster.

 

Summary

Risk management doesn't have to be daunting.  All it takes is a bit of thought, a generic step-wise process and a simple risk assessment form.  It’s worth spending an hour thinking through the risks in our business and planning what we would do if a risk became a reality. Then we can put it to one side and get on with what we really want to do: our writing.

Cash Flow Planning: Expenditure and Dealing with Deficits

Having looked at income, we now turn to expenditure. Here, there is tends to be more certainty, especially with regard to fixed costs (the costs we incur whether or not we have any work). For example, we know what rent or rates we are going to pay. We know what our utility bills are going to be. We know how much we’re paying for our phone. All of these tend to be regular payments that can be entered into the monthly columns.

Of course, if we are working from home and charging a proportion of the household costs to the business, we can choose to do this annually rather than monthly — or even to waive the charge altogether until the business is established. But if we do this, we have to remember we are giving ourselves a false picture when assessing how successful we have been.

The variable costs (those associated with a particular piece of work) are a little more difficult but for each income figure we enter, we should be able to estimate the related costs. These need to be entered at the time they are incurred (or at least paid for) which will often be before the income arrives.

To finish the statement, we need an opening balance for the beginning of the year and a carried forward figure at the end of each period (month). Remember that we do not start each month afresh. If we have a deficit at the end of one month, that is the opening balance at start of the next month.

OK, I think it is now time for a picture, or at least a chart. Let’s have a look at an example (and remember, the only purpose of these numbers is to illustrate the points, so we shouldn’t get hung up on whether they make sense individually or not).

Example 1 (click on chart to enlarge)

In this example, we have the four different income streams: six articles paid monthly between August and January; Amazon sales which come in bimonthly from October onwards; direct sales to the public which vary depending on events per month; and fees for running a writing course every two months. We see that the income varies between £20 and £370 per month.

For expenditure, we have a regular monthly contract for phone and internet; we have mileage costs and printing costs associated with the course, the former occurring in the same month and the latter a month earlier in each case; and we have a regular ‘drawing’ to cover our personal expenses. Whether this is a salary that we are paid as an employee of a limited company, or whether it is a drawing we make as a sole trader is irrelevant here. This is the money we need to live (and again - these are examples only, not real figures). We see that our total expenditure is fairly fixed at between £550 and £580 per month.

We have started the year with an opening balance (i.e. funding) of £4000. At the end of the year, our closing balance is zero. This means that we are projecting a loss of £4000 during the year. But remember, we are talking here about cash flow. What this tells us is that if we start with £4000, we will have enough cash to last the year but that we will need to sort out more funding (or raise income, or reduce expenditure) at the beginning of the next financial year.

Let’s suppose we don’t have a £4000 pot to start the year off. What happens if we only have £3000?

Example 2 (click on chart to enlarge)

 

In this case, our cash flow goes negative in December and we need to find more funding at that point but we have demonstrated that we can start with a smaller pot and keep the business running.

If we have our cash flow set up in a spread sheet, as I’ve shown here, it’s very easy to play the ‘what if’ game by changing some of the figures and seeing what the effect is on the bottom line. For example, try pushing up the income or reducing the expenditure to see what happens. This is also useful for crystallising exactly what we need to do to make the business a success.

As always, note that I am not an accountant or a lawyer, just a long-term business owner, talking about my own experience. If you are unsure about anything, always take advice from an appropriate professional.

Cash Flow Planning: Income

Like the P&L and balance sheet, cash flow can be looked at historically. In this context, it is used to show how changes in the balance sheet have occurred over the past year. However, I believe it is much more important as a planning tool and it is this aspect we are going to look at in the next couple of articles.

Cash flow is used to examine the expected flow of money over a given period of time, which may be years, but will certainly be months. It allows us to identify our cash requirements, to spot any periods when we can expect a deficit and then to plan in advance the funding of that deficit.

It not part of the record-keeping needed to work out how much we owe the tax man (or vice versa), so a cash flow plan is not a statutory requirement. However, I would suggest it is one of the most important tools in our box. It is particularly critical if we are likely to incur high expenses (which may be the case when we are starting a business) or if there is expected to be a time lag before payments will be received. This sort of time lag is certainly one that most writers will recognise.

A cash flow plan is an easy document to prepare and is best done either on paper (although this means we will have to do the sums in our heads) or in a spreadsheet. It can also be done within a computerised accounting package, but I’m not sure it’s worth the bother. Personally, I would opt for the spreadsheet every time. Set it up with a column for each month. Start with a year and when that’s done, we can decide whether we need to carry it forward for a second year or more.

The plan can be based on actual or projected figures, and will often be a mixture of both. We often know what our expenses are going to be, while we merely have expectations on levels and timing of income. We start by brainstorming all the income streams we are hoping to tap during the next year; together the the expected amounts and mostly importantly the timing of receipt. This is not about raising invoices; we can’t pay a bill with an invoice. This is about getting money into the bank. And it’s also about knowing and understanding the payment systems operated by our various clients.

Let’s take an example:

Suppose we are commissioned to write a series of monthly articles for a writing magazine and we are offered a fixed fee per article. The series will run from July through to December. The delivery date for the first article is April and then monthly thereafter. We will raise our invoices on a monthly basis from April onwards. There are a number of possibilities for payment:

·        The magazine may pay within a set period of invoice date; this may be 30 days, it could be 60 days, it could even be 90 days. The key thing is to know what to expect. Let’s assume they pay within 30 days of invoice date. The money should be paid at the end of May and therefore would be available to deal with June’s bills.

·        The magazine may pay at the end of the month of publication. In this case, the money would be paid at the end of July and would be available for August’s bills.

So there is a possibility that work carried out in April will not provide any positive cash flow until August. Of course, with a monthly contract, we know there will be money coming in each month from then on, for as long as the contract exists and for the three or four month time lag thereafter.

If we think about other income sources, there is usually a delay associated with payment. For example, money from sales of ebooks via Amazon or Smashwords is delayed twice: firstly until a threshold amount of sales has been made; and secondly according to payment policy. Amazon has varying thresholds depending on currency and payment method, but once the threshold is reached, payment is usually made 60 days following the end of the calendar month in which the threshold is reached.   That’s quite a time lag to build in.

Of course, some income can be obtained up front: cash from books sold direct to the reader; fees paid by students on writing courses or seminars; advances from publishers on commissioned books (I have been told that these still exist occasionally) are three examples I could think of. On the other hand, the royalties paid by publishers on traditionally published books can be months, if not years, down the line.

Once we have identified all likely income streams and the timing of expected payments, each stream in listed as a separate row on the spreadsheet and the income payments listed in the appropriate column. We can then calculate our expected income by month over the chosen time period.

Next week, we’ll look at expenditure planning (depressingly easier to do than income planning) and dealing with cash flow deficits.

As always, note that I am not an accountant or a lawyer, just a long-term business owner, talking about my own experience. If you are unsure about anything, always take advice from an appropriate professional.

Accounting Statements: Profit and Loss

As I said in the introduction to accounting statements, the profit and loss (P&L) statement provides an historical picture of how our business has performed over a given time period. It is calculated annually, at the end of a financial year, but may also be calculated on a monthly basis if we wish to have more detailed knowledge of how we are doing.

The financial year is not necessarily the same as the calendar year (January to December), although in some countries, it is exactly that. In UK, a limited company may use any year end date they wish, although 31st March is the most common one since it co-incides with the tax year. Whichever year end we pick, we still have to fit in with the HMRC timetable for PAYE, National Insurance and tax returns, all of which operate on the year April to March. If we are self-employed, our year end will be 5th April, in line with the individual tax year which starts on 6th April each year.

If we do want monthly statements, then we are probably at the point where a computerised system is appropriate. It is not a necessary part of running a business to know how to construct financial statements, but it is essential that we know how to interpret these statements and understand what they are telling us. That’s the aspect from which I’m approaching these articles.

In previous articles, we’ve already looked at the P&L equation: I (total income) - E (total expenditure) = profit (if I is bigger than E) or loss (if E is bigger than I). This time, we’re going to look at this in a little more detail and cover five lines on the statement instead of the three quoted above.

Total Income

As the term suggests, this is the total amount of money that has been invoiced in the year. Note the use of the word ‘invoiced’. It’s more than likely that not all the money has been received yet, especially for any invoices raised in the last month, but everything earned in a financial year should be accounted for. Total income is also sometimes called Turnover, Revenue or Sales. It is a measure of the total amount of business we have done in the year.

Direct Expenses

This is the expenditure incurred directly in doing the business measured above. It is the cost of printing our book (but we can only include the cost of copies that have actually been sold); the postage for distribution of specific copies of our book; the travel costs incurred in presenting a training course or a paid-for appearance. We should ask ourselves the question: would those costs have been incurred if that piece of work had not been carried out. If the answer is ‘no’, then those are direct expenses. They are also sometimes called Variable Costs since they vary with the level of business or the Cost of Goods Sold.

Gross Profit

When direct expenses are deducted from total income, the resulting figure is called gross profit. In traditional businesses like manufacturing, it is a measure of how efficiently labour and materials are utilised. In our writing business, we don’t include labour costs unless we sub-contract out a specific piece of work, so it’s a measure of how efficiently we use the materials and other resources that go into generation of our income. There is no right answer to the question: what is a good percentage gross profit; it varies with circumstances and the type of business. However, I would suggest it should always be a positive number. In other words, we should always generate a gross profit, no matter how small, in our business. Otherwise, we might as well set fire to our money or (preferably) give it away. There may be times when we choose to sell our goods or services at cost (for example if we speak at an event for expenses only ) or even make a loss (for example by donating copies of our books for a raffle) but that’s not a sustainable business model in the long-term.

Indirect Expenses

There are all sorts of other expenses we incur running our business but which cannot be associated directly with any one income stream. For example, the cost of running our office, whether it is part of a serviced building or our back bedroom; marketing costs (business cards, book marks, adverts); Internet and phone charges; and most important of all, what we pay ourselves. We should ask ourselves the question: would those costs have been incurred even if no work had been carried out. If the answer to this question is ‘yes’, then we are looking at an indirect cost. They are sometimes called Fixed Costs or Overheads since they are independent of the level of business.

Net Profit

When the indirect expenses are subtracted from the gross profit, the resulting figure is called net profit.  Mathematically, the same figure is obtained by subtracting total costs (direct and indirect) from total income. So net profit, which is sometimes referred to as bottom line, is a measure of the overall success of the business in financial terms (I fully accept there are other ways of measuring success).  In formal company accounts, net profit is further sub-divided into net profit before tax and net profit after tax. I’m not going to go into tax, as it’s a highly complex area, apart from making the point that while not all income will be taxable, not all expenses will be tax-deductible. This is an area where I believe it pays to take expert advice.

Unlike gross profit, it is very likely that in the early years of a business, net profit will actually be a negative figure (more correctly called net loss) and so long as we have funding available to cover the short-fall, that’s perfectly acceptable. And that’s where cash-flow comes in. We’ll talk about that next time.

As always, note that I am not an accountant or a lawyer, just a long-term business owner, talking about my own experience. If you are unsure about anything, always take advice from an appropriate professional.

Accounting Statements: Introduction

In the past two articles, we’ve looked at what records we need to keep in our small business; records both of income and of expenditure. Now we’re going to start looking at why we need to keep those records and what we need to do with the data we collect.

There are two main reasons for keeping financial records. Firstly, it is a legal requirement. The law says if we earn money, we have to pay tax. I know that’s a very broad statement and there are all sorts of things to consider, such as whether a particular income type is tax-free; or whether our earnings exceed our tax allowance level; but in general terms, if we earn, we pay tax. And yes, before you ask, that does apply “even if it’s only a hobby”. Although why we would be thinking about hobbies when we are supposed to be running a business, I have no idea.

Incidentally, although I am writing about systems in the UK, I think I’m safe in saying the rule “if we earn, we pay tax” applies in most other countries as well.

But frankly, there is a much more important reason why we keep financial records: we need to know whether our business is successful or not. Remember the quote from Mr Micawber: “Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.” (David Copperfield by Charles Dickens). Now, I’m not actually saying that profitability is the only measure of success; but we are running a business here. We need to know whether we’ve made a profit or not; whether our cash flow is going to be sufficient to pay the mortgage next month and so on. As always, we should try to keep the systems as simple as possible, so they are effective, tell us what we need to know, with as little effort as possible, so we can concentrate on what we really want to be doing: writing.

There are three main accounting statements. I’m going to introduce all three in this article, then go on to talk about the two key ones in the next couple of articles. The statements are: profit and loss; balance sheet; and cash flow.

Profit and Loss

The profit and loss statement is an historical picture of how the business has performed over a given time period. We’ve already talked about the profit and loss equation in earlier articles:

I (total income) - E (total expenditure) = profit (if I is bigger than E)
or loss (if E is bigger than I)

We’ll look at this in more detail next time. The P&L statement is usually calculated annually; it will certainly form part of our closing accounts. However, it may also be useful to monitor it on a monthly basis. If we are going to do that, it’s certainly easier to do with an accounts package (software).

Balance Sheet

The balance sheet provides a snapshot in time; what is the business worth today? It compares the total assets (what we own in terms of equipment; money in the bank; stock waiting to be sold; and money owed to us) with the total liabilities (what we owe in long-term or short-term debts) and also looks at how the business is funded. This statement is more appropriate to limited companies and is not a requirement for a sole trader in the UK. It can be calculated manually, but is much easier to prepare at the press of a button via a software package. I’m not going to cover balance sheets in nay more detail than this.

Cash Flow Statement

This is arguably the most important statement for any business; it is a forward-looking document, used to plan the flow of money over time. It is particularly important if we are going to incur high expenses (for example, if we are self-publishing a hard-copy book) or if there will be a delay before receiving payments.

In most businesses, there is a time-lag between incurring expenditure and bringing in income. Even cash businesses like shops often have to pay upfront for their stock, but only get income in return when the stock is sold. As writers, we may be lucky enough to have an advance against a commissioned book (although that’s becoming rarer these days) but even that will then to be a relatively small amount of income. If we have to wait for publication, for sales to grow and for the first royalty statement to be issued (which can be six or twelve months after publication), our investment (in time, in electricity, in printing costs etc) will occur quite a bit in advance of the expected income. We need to know if and when our cash flow is likely to be negative (more going out than coming in) so that we can plan our funding appropriately. This is particularly important in a start-up business and applies equally to sole traders or limited companies. We will look at cash flow in more detail in a couple of weeks’ time.

As always, note that I am not an accountant or a lawyer, just a long-term business owner, talking about my own experience. If you are unsure about anything, always take advice from an appropriate professional.
 

Keeping Financial Records: Expenditure

Last week, we looked at how to keep records of income; now we’re going to look at recording our expenditure. Then we’ve got the two sides of the equation: we need to know what money came in (our income) and what money went out (our expenditure). The difference between the two is our profit or loss. If our income is greater than our expenditure, we have made a profit. However, if our expenditure is greater than our income, we have made a loss.

So let’s think about how our expenditure is recorded.

As writers, our expenditure can go in lots of different directions. Here are a few I thought of and there will be others you can list too:

·       The cost of printing our books, if we publish independently; I’m not just thinking about the costs of the physical books, but the cover design, services of an editor or proofreader; the purchase of a block of ISBN numbers etc.;

·       The purchase of books or magazines relating to our business and bought for the purposes of research;

·       Competition entry fees;

·       Train fares or mileage for travelling to courses or workshops, whether as the teacher or as the student;

·       The money we pay ourselves (whether that’s a PAYE-managed salary within a limited company or personal drawings if we are self-employed);

·       Bank charges and accounting/book-keeping fees;

·       The costs of running an office (and as business people, we do have an office, whether it’s part of a serviced building; the back bedroom; or a corner of the kitchen table): paper for the printer; postage for sending out copies of our books, competition entries or submissions to agents; charges for our website; fee for renewing our antivirus software etc.;

·      Capital purchases such as our laptop, printer, desk and filing cabinet.

Many of these payments will be made by cheque, internet payment or credit card and will be accompanied by an invoice or a receipt from the seller, so there is an immediate paper trail. Others will tend to be cash payments, especially if it’s for a small amount. All businesses should be able to provide a receipt on request; we need to get into the habit of always asking for one, even when it’s just a short taxi ride from the station to a conference location, or a quick sandwich grabbed during the lunch break on a course.

We looked at invoices and receipts in last week’s article. The only difference between income and expenditure is that in the first, we issue the documents, whereas in the second, the documents are issued to us. The documents themselves will be the same. And remember they will range from a formal invoice from a printer to a scrappy till receipt from a coffee bar. So once again, when it comes to sorting out our total expenditure for the business, we will be faced with a complete mix of different types of record.

As with income, all the bits of paper need to be collated in order to calculate total expenditure. It is also useful at this stage to group expenses together under different headings: direct expenses; wages; office expenses; professional fees etc. Our options were spelled out last time, but bear repeating: we can give the job to the accountant to do for us at the end of the year, which is effective but costly. We can give it to a book-keeper, either monthly or at the end of the year; again, this is effective and less costly than an accountant, but still means paying out money. Or we can do it ourselves, either monthly or at the end of the year. This option may be effective, depending on our abilities with numbers, and is the least costly in terms of actual expenditure, but it is costly in terms of our time.

Once again, I’m going to assume we decide to do it ourselves on a monthly basis, while the task is smaller and our memory is fresher. We will be listing all items of expenditure in one place. Let’s look at what that might look like for our three types of financial system:

·       Paper-based: a simple cash book with appropriate layout can be bought from any stationers. An A4 hard backed notebook will do the job just as well, but the columns will have to be drawn in. Start each month on a new page. List the expense items in date order (which helps when reconciling the bank statement) and put a total at the bottom. If you are grouping expenses as this stage, have a separate column for each category of expense and total each column separately as well In theory, you can use the same page as the income record, but it’s probably simpler and neater to use a different book, or a different section of the same book.

·       Spreadsheet: Use one spreadsheet for all the accounts, but use a separate worksheet for each type of transaction (income, expenditure etc). List the expenses in date order and use the software to calculate a total at the bottom. As above, use separate columns for different categories of expense.

·       Commercial software: Each transaction will need to be converted to an expense payment to enter it into the system. If the supplier has issued an invoice, this needs to be entered and then the payment is accounted against it. If there are a lot of small cash transactions, it can be time-consuming and unnecessary to enter each one separately. My solution is to pull these all together on a monthly basis as a single invoice, itemised line by line within the document. The software has the provision for allocating a category to each expense and the facility for producing reports on each category as required.

Using any of the above systems on a monthly basis means that at the end of the year, there will be just twelve figures per category of expenditure to collate in order to identify total expenditure.

For non-receipted expenses, such as mileage, it is important to keep a written record. Every year I promise myself I will put a book in the glove-compartment and record every journey at the time it occurs; and every year the system collaspes quickly or never gets started. Luckily, I keep a detailed appointment diary and have a reasonably good memory. At the end of each year, I list all my journeys and calcualte the mileage using Bing Maps, but it takes me ages. Doing it on a monthly basis (or better still, journey by journey) would be a much more effective approach.

Closing notes: This article is about recording expenditure. Some of that expenditure will be tax-deductable, some may not be. No distinction is made here between the two. At this point, we are only looking at what records we need to keep. What we do with them later is a whole different subject.

As always, note that I am not an accountant or a lawyer, just a long-term business owner, talking about my own experience. If you are unsure about anything, always take advice from an appropriate professional.