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You don't have to be an accountant to master your business finances. You own your own business, so you should easily be able to answer any question about your business finances.
No one expects you to be an accountant, just because you have your own business. But you need to be able to handle and understand your finances if you really want to succeed in business.
Do you know when you recurring payments in your business are happening?
Do you actually know your net income for last month? Or last year?
Do you know what tools you need to master your business finances?
Do you have a system in place for your business finances?
These are all questions that every business owner should be able to answer. But in my experience as an auditor, there are so many business owners that can't answer these questions.
Yes you are good at running a restaurant. Or you are good at writing. Or you are good at telling others how to create something.
And these are all traits of successful business owners.
But if you can't master your business finances from the beginning, you will most likely fail in business at some point because it's not easy to get caught up when you are behind with your business finances. And most of the time, the catch up only happens because you either need to file your taxes, you get audited, or you need to apply for a loan or credit card and they need your actual business numbers.
I know it's tempting to only use your personal bank account for all of your business needs until your business is regularly bringing in enough money to substantiate opening a business bank account.
But don't do it.
Open a business bank account from the very beginning.
Commingling your business and personal expenses is a very messy road, and one that you don't want to go down if you don't have to. When you get to the point of needing to organize your business expenses, how are you easily going to know which ones are business and which are personal?
In the case of an audit, if the auditor can't easily tell which ones are business expenses, you will most likely get none of them as business expenses. Therefore you will owe more tax at the end of the day because you can't deduct your expenses from your income to reduce your net income.
So open a business bank account from the very beginning.
If you want to use a personal credit card for business purposes, that is also okay. But do not use this credit card for anything other than business purposes. Use a completely separate credit card for your personal purchases.
I know we live in a digital age, where very records are kept on paper anymore. And that is okay. As long as you still keep a copy of everything related to your business finances electronically.
I organize all of my business receipts in my email inbox. At the beginning of each year, I'll just start a new folder for that year. I name my folders something like 2019 Income and Expenses.
That way, when I need to look anything up, I can always go back into that folder to find the exact receipt I'm looking for.
It is required by the IRS to keep a copy of everything for a minimum of 3 years, but it's recommended to keep it for 7 years.
And since I just start a new folder each year, they are all still in my inbox and easily accessible.
If you want to keep a copy of everything in paper form, just create an organization system for yourself that allows you to easily find everything and anything you need.
The next time you are tempted to hit delete after you receive a receipt for a business purchase, don't do it. Just move it to another folder.
Or if you are one of those people that just leaves everything in your inbox and has 89,526 emails in there right now, please create a folder organization system in your inbox.
If you don't create an organization system anywhere else in your life, I don't care. But please, please, please, create one for your business finances. Make your life easier here and create a system so that you don't actually fail in your business.
You may think you don't need a budget for your business. But you do.
Just because your bank account says you have money in the bank, doesn't mean you really do have that money. It is most likely already earmarked to be spent somewhere else.
When you create a budget for your business, you know what expenses are coming up. You know when your recurring payments are.
Many businesses will give you a discount for paying for a year up front, instead of paying month to month. And many business owners will take advantage of that payment plan.
When you have a budget to follow in your business, you can plan for that yearly payment to show up, instead of "Surprise! It's time to pay $300 for the year today!" and you have no idea where you are going to get that $300.
You may also be thinking that you don't know how to budget for your business because you don't know what you are going to offer to your prospective clients this month.
Create your budget for your expenses first, so you know how much money you need to bring in.
Then plan for your income and what you are going to sell this month.
A business is never going to bring in the same amount of money every month. There may be a lot of money this month and little money next month.
And this is why it's even more important to create a business budget!
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Learn everything you need to know to master your business finances and taxes explained in plain English.
There are several tools available to you to help you with your business finances. But you have to choose the right ones for you, AND ones that you are going to actually use.
When you are first starting out, just using a spreadsheet is perfectly okay. You don't usually have a lot of expense line items to track, so a spreadsheet that is free will greatly help you out.
But there are also tools like Freshbooks, Quickbooks, and Xero out there that can help you with your business finances. Make sure you get the right one that works for you.
And other tools that can help you with your business finances is taking courses that really help you understand what is included in your business finances, following accounting bloggers that can give you advice through their blogs (there are a handful of us out there), or just hiring an accountant to help you so your questions can be answered.
Like I said at the beginning, you don't have to be an accountant to handle your business finances like a rockstar. But you do have to understand them and what everything means. Or your business will most likely fail because you aren't doing something right financially.
Yep, you read that right. Make a date with your books. And make this a regular date.
When you take my course, I walk you through how to create a daily habit of doing your books that takes less than 5 minutes. But you don't have to have a date with your books on a daily basis.
My recommendation is to have a date once a week. Let it be the first thing you do on Friday morning before you get into creating any content in your business or before you jump on any client calls.
No, seriously, pencil this date in on your calendar and make it recurring every week until you no longer have a business.
This way you are doing your bookkeeping on a weekly basis and you'll see what is happening with your money and even build a relationship with your money even more. This will usually result in you bringing in even more money in your business.
Whether you handle your business or you hire someone else to do it for you, you still need to establish standard operating procedures (SOPs) and systems.
When you create content, there is a set way of doing things that you do right?
First, you find an idea to write about. Then you research and write an outline. Then you create the content. Next, you edit it and add anything that was missing. Next you create images and shareable media for your post. Then you publish it on your blog or in your newsletter, etc. And finally you promote it so others can read it.
That right there is an SOP for creating content.
Now hopefully you would create more detailed SOPs for your business, but I made a simple one like that to make it easy for you to understand what I meant.
And you need to create these same SOPs for your business finances.
What programs are you going to use to manage your business finances?
How often do you reconcile your bank account?
How often do you categorize your business expenses?
How do you create a business budget?
How do you plan out your sales?
Do you create a quarterly business plan?
Do you plan how much you are going to pay yourself? Your employees and your contractors?
How often do you consult an accountant or bookkeeper about your business finances?
All of these questions need to be answered in your SOPs for your business finances. You need to create a plan so that everything always happens the same over and over again for your business.
Plus when you have an SOP for your business finances, if you ever feel like you are forgetting something, you can easily review your SOP and see exactly what step you missed.
I've mentioned a couple of times above about hiring an accountant for your business. It doesn't matter how often you consult with this accountant, but you need to have one on your team so that you can easily get accounting help if and when you need it.
Maybe you only need an accountant to file your business tax return each year. That's okay. But find one now, not the minute you need your tax return filed.
Maybe you only need an accountant to be able to ask questions to about financial decisions in your business. Again, that's okay. But find one now so that the accountant is readily available when you need him/her.
When you find someone that you can trust and know you can rely, it makes it much easier for you to be able to just reach out when you need something, instead of having to search and end up rushing. When we rush, we don't always get the correct answers.
So avoid that rush by finding a professional you can count on today.
Plus mastering your finances can be the difference between your business succeeding and your business failing.
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Clarissa Wilson is a financial strategist and online educator who holds two master’s degrees in Forensic Accounting. Also creative and spiritual, she is an intuitive empath and introvert. Clarissa is the host of The Prosper + Profit Podcast, where money conversations occur on a daily basis -- as she believes that money shouldn’t be a taboo subject. After growing up on a dairy farmand learning to work hard for money, Clarissa awakened to a path that allowed wealth to flow easily to her. Clarissa currently lives in Pennsylvania with her two cats.
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