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5 accounts designers need to monitor your finances effectively

SUMMARY

1. Overall account
2. Income account
3. Bills payable account
4. Emergency fund
5. Expenditure
FAQ

1. Overall account

The overall account is linked up to the income and expenses. I do not touch this account because it is set up to contain all the messy ins and outs statement of the funds.

Account settings
  • Automatic transfer in from the income account
  • Automatic transfer out into the 3 ‘Money out’ accounts

 

2. Income account

All earnings are directed to the income account. Product sales, services provided, recurring sales. At the end of each month, I generate a credit statement to see my earnings for the month. This separate account makes it easy for me to analyse where and when my biggest earners are.

Account settings
  • The maximum amount of $2,500.
    This value is set to allow any refunds to happen if required.
    Anything more gets redirected to the overall account.

 

3. Bills payable

The bills account is where bills and overhead paid. All predictable bills (utility bills, rent, recurring subscriptions) including paying yourself are drawn from this account.

At the end of 3 months, I can look at which bill is most of the money going to and adjust accordingly. If I was paying too much for online courses, I can look at alternative online course providers and reduce my bills. To set this account accurately, calculate the monthly cost of running your business. You can also monitor this account over a period of two months to make sure you have covered all your expenses. Any repeat billing is a recurring cost.

Account settings
  • Automatic and monthly withdrawal from the overall account
  • Autopay bills and subscriptions

 

4. Emergency Fund

Always save up for a rainy day. The emergency fund should also be your first financial priority for your business.

It should be at least 3 to 6 months worth of your monthly expenses (your bills account). Set yourself a deadline for this fund too and aim to reach this goal within 6 – 12 months. Once you have calculated your monthly bill, you will be able to calculate how much you need to save up per month to reach this goal.

Account settings
  • Automatic and monthly withdrawal from the overall account

 

5. Expenditure

The final account you should have is a spending fund. This account is used for discretionary purchases such as hiring contractors to complete specific tasks for your business. The main reason for this dedicated expenditure account is to stop over-spending. Giving yourself a monthly spending budget for your business makes you think twice before spending. You will ask yourself whether it is urgent and necessary to hire someone to do it for your or if you can do it on your own or schedule it for another time.

This account is also for project expenditures such as product developments and on-cost materials for service delivered. At the end of each month, you will be able to sift through and extract additional project costs.

Account settings
  • Automatic and monthly withdrawal from the overall account. Start with small amounts and increase if necessary.

 

Frequently Asked Questions

Any tips on how much % of the money each account should be?

There isn’t a rule of thumb for the percentage because the cost of running a business differs in every creative industry. But if you must: Income = 50% bills, 25% emergency fund, 25% expenditure.

 

What if I am constantly over-spending from my expenditure account?

Increase your expense budget but more importantly, look closely at what you are spending on consistently. See if you can get it on a recurring plan i.e. turn it into a bill. Turning expenditure into a bill may seem like increasing the cost of running your business unnecessary. However, the benefits are it becomes a predicted cost, and you do not have to stress over spending past your budget.

 

What happens when there’s money piling up in the overall account?

Transfer them to your priority account, the emergency fund.

 

What happens when there’s money piling up in the emergency fund?

Hooray! Pat yourself on the back and celebrate. You have done very well!

Consider creating a new account called Investment Fund. Sent monthly savings into this account and use this fund to invest and diversify your portfolio. Consider termed deposits, trading stocks or property investments to grow the net worth of your business.

at a glance

1. Overall account
2. Income account
3. Bills payable account
4. Emergency fund
5. Expenditure
FAQ