As a single owner operator DJ company, I often field questions from others in similar positions, asking how I pay myself. This week I am going to provide an outline on how I manage incoming client payments, booking fee payments and then, ultimately, how I pay myself.
The bulk of my wedding couples submit payment for their wedding in three portions. The booking fee ($1250) is due at the time of signing the agreement, the second payment (half of balance remaining) is due at the first planning session 5 – 6 months prior to the wedding and the last payment (total of balance remaining) is due at the final planning session 1 – 2 months prior to wedding.
Booking fees are not placed into my operational cash flow bank account until after the event has taken place. All booking fee payments are carefully tracked and then noted when they are transferred from my booking fee bank account to my operational cash flow bank account.
My relationship with booking fees changed a couple of years ago. Up to that point, I was consuming the booking fees as they came in. They would go immediately into my operational cash bank account for using against expenses as needed. A part of me started getting nervous though. What if, all of a sudden, I was unable to fulfill my event commitments? How would I pay back the booking fees I’d taken in? The agreements I sign with all of my wedding couples promises they will get their booking fee back if I have to cancel my involvement in their wedding. This led to me putting all booking fees into a separate account.
I started off with a small number of booking fees being put into the new account and slowly transitioned (over 2 years) to all booking fee payments being “saved” there. Financially, it was a tight couple of years while I transitioned to this booking fee management system, but now that I am withdrawing from the account at approximately the same rate that I deposit into it, operational cash is no longer restricted by this system.
Having this separate cash in the bank (the booking fee account) also has a side benefit. If I ever find myself in a position of facing an unexpected expense or I want to purchase some new, un-budgeted-for equipment, I can “borrow” from my booking fee account, without the hassle of a bank loan or the interest rate of a credit card or line of credit. While not something I would encourage a habit of, it is nice to have available, if needed.
For all weddings, money is deposited into my operational cash flow account at three intervals: 5 – 6 months prior to event (first planning session payment), 1 – 2 months prior to event (final planning session payment) and immediately following the event (booking fee transfer payment). This system of payments creates predictable cash flow throughout the year without a lot of major highs and lows to have to contend with.
As the Canadian wedding season segues into some of the corporate work I do between November and February (along with the occasional “off season” wedding) and I begin taking regular first planning session payments (May and June wedding planning sessions start in January), my business financials are not affected by the “seasons” of my work. (Weddings, if you’re curious, make up between 80% and 85% of my annual revenue.)
Personally Getting Paid (the good part!)
With an understanding of the above information, this is the easy part: I am paid a set sum of money, every two weeks. This is a transfer of funds from my business account to my personal joint account with my wife.
This biweekly payment has no bearing on whether I am actively working at events in the two-week timeframe or not. I always get paid, every two weeks. My payday is every second Wednesday, opposite to the weeks my wife is paid, to ensure optimal cash flow for our family finances.
Obviously, the topic of finances is a massive one and I have barely scratched the surface here. If the demand is there, I will write more on how I operate my financials. Having said that, I am still tweaking a system of cash management I set up about 18 months ago known as Profit First. For lots of info on this, reach out to my friend Jason Spencer (Facebook or website) who is a DJ in Sacramento and a certified coach with Profit First. Without going into personal details yet (I will, once I’ve tightened things up a bit more) I will say that the Profit First system has been absolutely life changing and I wish I would have discovered it when I first started my business!
If you have a finance question you’d like me to share my perspective and system on, please get in touch and I’ll provide you with all I can. Maybe your question will turn into the next blog post…
For those that are curious, that is how I get paid.
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