How do craft artists even out the ups and downs between shows to avoid going broke just before the next string of shows? One of the toughest parts of being in business is predicting your income. No matter how great your artwork, you still have to have sales and profits to survive. And you have to know when and how the money is going to arrive and how and where it's going out.

Budgeting can help. The most useful budget will be based on expenses and revenues gathered from your last year's financial records. If you don't already track your business finances from month to month in detail, make a resolution to do so starting now because good recordkeeping will help you manage the money you have on hand for the coming season. To put together a budget, you will need to record and project cash flow and prepare a profit/loss statement.

Cash Flow Example

Following is an example of a cash flow spreadsheet I created using Excel software. Any spreadsheet program can produce a similar report. With a spreadsheet, you can plug in formulas to calculate sums automatically so that all you need to do is enter in each month’s numbers and your cash flow is totaled at the bottom.

You can also create such a chart by hand. Here is how to formulate your chart. The first number to fill in is the amount ‘On Hand’ in the beginning of January. This is whatever money is in your business account at the beginning of the year. Next, add up the total amounts for ‘Cash In’ and ‘Cash Out’ for each month. Enter the totals in the area near the bottom where it says ‘Cash Flow’.

For each month, add the total amounts (near the bottom of the example) in the columns for ‘On Hand’, ‘Cash In’ and ‘Cash Out’ and enter the sum in the row called ‘Total’. Also enter that same amount in the following month’s ‘On Hand’ column to start the calculations for the next month. Continue entering data until all rows and columns are filled.

By creating such a spreadsheet for your previous year's income and expenses, you can safely project cash flow for the coming months. After I began implementing this cash 
flow method of tracking revenue and costs, I never ran short of cash again. I can project the numbers forward for any number of months and learn how much money I have to spend on materials, travel, new projects and other expenses. I know where my money is coming from or not and decide if I can afford to do more shows.

If you find that your cash on hand is now or projected to go below zero for several months, you need to take a serious look at your business. Where can you cut costs? 
How can you increase sales? If you borrow money, will sales from craft shows bring in enough income to repay the loan and get you back into the above zero range? 
These are tough questions. But you must ask and answer them to stay afloat financially.

Profit/Loss Statement

A Profit and Loss Statement is simply a list of all your sales, minus your cost of goods, minus all your other expenses. If you generate a Profit/Loss Statement monthly, you can see the health of your business in a snapshot. It looks like this:

Portions of this article are excerpted with permission from The Basic Guide to Pricing Your Craftwork, by James Dillehay.