How to Organize Your Business Finances

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You know how important it is to have an organization system for your business finances. This system is not only important in the case of an audit, but it's also important that you can easily find anything you need related to your finances when you need it. 


Do you know how many times I have been handed a box full of receipts? Or a manila envelopes full of receipts? 


Not a single thing is organized in these boxes or envelopes. They are just thrown in the box, never to be looked at again. 


What if someone that you purchased something from, comes to you 3 months later saying you never paid your bill? 


When your system is so haphazardly organized, you'll never even be able to know if you did pay the bill or not. 


Let's create a business finances organization system today!


Paper vs. Paperless


Which do you choose? Honestly it's up to you as long as you create a system where you can find everything you need with ease. 


Paper Organization System


With a paper organization system, you will need a filing cabinet and file folders at the minimum. 

The easiest way to file your receipts with a paper system is by vendor (who you purchase from). Each vendor would have their own file folder. 


Then each time you get a bill from that vendor, you would put your newest invoice in the front of the folder. Therefore the folder would be organized by date in reverse order. 


You also want to start a new folder for each year. 


The benefit of having a paper organization system is that if something were to happen to your computer, your wifi, or the place where you store your electronic data, you can still access your financial records. 


The con is that this system takes up a lot of physical space and also means that you will need to use a lot of paper to print everything. 


Paperless Organization System


The paperless organization system is where you store everything on your computer or in the cloud. 


Paperless has become very popular over the past several years and it is perfectly okay to store your business finances records electronically, as long as you have an organization system in place. 


Almost every receipt you get for your business comes through your email. 


I always recommend that you set up a folder in your email account for your receipts. And create a new folder for each year. 


But you should also create another system of organization on your computer. You can use your bookkeeping program if they allow for you to upload copies of your receipts. 


You could also create a folder on your computer that has PDF copies of all of your receipts as well. Again, the folders should be separated by year. 


You could have a folder for each vendor inside the main folder. You could have a folder for each month inside the main folder. 


I've recently created a new system for myself with organizing my folders on my computer for my business finances. 


After I put the receipt in my bookkeeping program, I will make a PDF copy of the receipt, then put it in a folder by month on my computer. I use Dropbox to store everything of mine. Then once a week, I back up my entire Dropbox folder to an external hard drive. 


With this organization system, I am doing 2 things. I am verifying that all of my receipts make it into my bookkeeping program. I am also making sure that I have a copy of every receipt saved somewhere outside of my inbox. 


Also remember that there are vendors that you pay automatically every month that do not email you receipts. Some of the culprits that do not email receipts include: email service providers, keyword search programs, and xxx


So make sure you log into your account and get a copy of your receipt each time you pay. 


The benefits of a paperless system are that they take up no physical space and as long as your system is organized, you can easily find any receipt that you are looking for. 


The cons of a paperless system are that if something were to happen to your computer or your internet, you won't have access to your system. 


At the end of the day, it's your choice to create a paper or paperless filing system for your business finances. But they need to be organized and you need to keep a copy of all of your receipts. 



Finally take your taxes from frustration, chaos and confusion to calm and organized.


Learn everything you need to know to  master your business finances and taxes explained in plain English. 

Here are more tips to stay organized in your Business Finances:

Information You Need for Business Finances Organization

There is a lot of financial information that you need for your business finances. Setting up the system the first time can be time consuming, but then it's organized for you to use going forward with ease. 


You will need the following categories in your organization system: 

  • Creditors/vendors - the companies you pay and owe money to for their services to your business
  • Clients - the people who pay you money in your business
  • Bank statements and reconciliations
  • Credit card statements and reconciliations
  • Payroll and employee information
  • Taxes
  • Loans
  • Assets
  • Company information

Let's go more in depth into each of these categories. 


Creditor/Vendors


In an online business, you will end up with very few unpaid bills. Most of your purchases are paid for at the beginning of the service or in order to receive a product. 


But you want to keep a system for organizing your unpaid bills so that you pay them on time to avoid any late fees and penalties for not paying. 


In a paper system, the most beneficial organization system is to create a file folder for each vendor and organize them alphabetically. 


In a paperless system, you can create a folder for each vendor and organize the bills by date, or you intermingle your bills in a monthly folder. Just make sure you name each receipt with the vendor name and the date of purchase. 


Clients


This is how you make money in your business by selling to your clients. 


Every single email and ping that you get from your payment system that you just received a new payment should be saved into a folder. 


Make sure each invoice shows up in your bookkeeping program, then either print it out for your paper filing system or put it into the correct monthly folder for your income in your paperless filing system. 


By keeping an organization system, you'll easily know which invoices aren't paid yet, so that you can follow up with your clients and get them to pay their bills. 


Bank Statements and Reconciliations


Most banks do not mail bank statements anymore, but you do still need to keep a copy of your bank statement for every month. You can access these statements in your online account for your bank account. So make sure you download the current month's bank statement, then either print it or save a copy to your computer. 


You will need the bank statement to do your reconciliation each month. 


If you have more than one bank account, then make sure you get a copy of each bank account's statement. 


Credit Cards and Reconciliations


If you have a credit card for your business, you should have a separate credit card for your business that is not used for personal purposes. 


Just like your bank statements, you will need to download a copy of your credit card statement every month and complete a reconciliation. 


Each item on the credit card should be treated as it's own item in your bookkeeping system. Do not just enter your total credit card bill as a single entry in your bookkeeping system. 


You can also enter your credit card account into your bookkeeping system to make it easy to see each transaction and reconcile the account with ease each month as well. 


Payroll and Employee and Contractor Information


You should have a folder for each employee and contractor with a copy of their W-4, W-9, or W-8BEN (for contractors who live outside the USA), as well as any other pertinent information for the employee or contractor. 1099's, W-9's and W-8BEN's are covered in depth in this article


Each time you pay your employee or contractor, you need to keep a copy of the pay statement and file it in their folder. Do not just rely on your bank account or payroll system to keep copies for you. 


You may also have time sheets, management reports, applications and other personal details for your employees and contractors. These should all be kept in each individual employee's folder. 


Taxes


There are different types of taxes that your business is responsible for. It is your job as a business owner to make sure you are following the laws and regulations in your business. 


The common taxes include income taxes, payroll taxes and sales taxes


Each tax usually has a tax return that you file each month or quarter. Make sure you keep a copy of each return, as well as any back up that is used to file each return. 


Because there are so many taxes and each tax has their own due date, you should also create calendar notifications or reminders to make sure that you have paid each tax by it's due date. Penalties and late fees and governments are not very forgiving when it comes to missing your payments. 


Loans


Each loan should have it's own folder. Most loans are also paid automatically, so you may or may not receive a copy of the bill each month either. 


But you do need to keep a copy of the bill. 


The folder for the loan should have the details of the loan, the loan agreement, the payment schedule that is divided by interest and principal payments, and each monthly statement for your loan. 


If you are taking advantage of the home office deduction on your tax return, you may also want to keep copies of your mortgage bills and payments in a folder with your business finances organization system as well. 


Assets


When you purchases something that is an asset for your business (usually office equipment is an asset, think computers, standing desks, filing cabinets, office furniture, etc.), you really should file the receipt separate from your expenses. 


This way when it's filed separately, when you are asked for a copy of it, it's much easier to find because you have a folder just for assets. 


Your accountant at the end of the year will ask for these receipts to file your depreciation and add any new assets to your asset list. 


Company Information


When you start your company, you may get an EIN (employer identification number) for your business so that you don't have to use your social security number for everything. 


You may also have documents that are produced by your state for your business registration. (There is no registration form when you are a sole proprietor in the USA.)


There may also be annual renewals for company. 


Payroll tax licenses, sales tax licenses, and any other taxes that you may be responsible for - you'll want to keep a copy of all letters and licenses in your business information folder. 


When everything is stored in one place, it makes it much easier to find exactly what you are looking for when you need it. 


Other Important Business Finances Organization Systems


Set Up Separate Personal and Business Banking


You really shouldn't comingle your personal and business banking. When you start your business, you should also open a brand new bank account for your business. 


Get a Business Credit Card


Whether you take a personal card that you have and deem it for business use only, or you open a business credit card, you want to have a credit card that is just for business purposes. 


In an online business, it's much easier to pay everything by credit card and then pay your credit card each month. 


There are more financial protections in place when you use a credit card vs a debit card. 


Obviously if you don't want to use a credit card, then you don't have to. But if you do use a credit card for your business, then it's for business purposes only, nothing else. 


Use a Bookkeeping Program


You should always have a bookkeeping program in place in your business from the day you start it. 


This doesn't mean that you have to invest with Quickbooks, Freshbooks or Xero from the start. You can use an Excel or Google spreadsheet to keep your finances organized as well. 


You just need to have this program in place. 


Each time you get a receipt and organize that receipt into your filing system, it should also go into your bookkeeping program. 


There are bookkeeping programs out there that you can use. I recommend Quickbooks, but you can also use Freshbooks, or Xero.  I don't recommend the free programs (unless it's a spreadsheet), because they are glitchy and can have issues. 


You want a bookkeeping program to use that you like and aren't going to have to switch in a few months down the road. All three of the programs I recommend come with a 30 day free trial so that you can try out the program before fully committing. 


Schedule Time to Stay Organized


Whether you schedule once a day or once a week, you want to build time into your schedule to organize your business finances, do your bookkeeping and keeping copies of your receipts. 


The more often do you have time scheduled, the easier it is to maintain your business finances and keep them organized. It is very important to keep them organized and maintained, as well. 



Your business finances organization system does take some time and planning to get it in the right order. But once it's set up, it's easy to maintain. You just need to create a regular system for keeping it maintained. 


This business finances organization system is a very important part of your business that you need to keep up with. 

 


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About the Author Clarissa

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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