5 Ways You Can Start Managing your Small Business Finances TODAY

If you’re anything like most small business owners, you’re absolutely fantastic and passionate about what you do. Part of being a fully functioning small business however, is getting a handle on your business finances! Don’t worry, it sounds way more daunting than it actually is. You can do this! As a money coach and blogger, I’ve worked with women who are at all points in their business journeys, from their first $100 to making multiple four figures each month. This area is essential to think about, plan for, and execute accurately so you can be sure your business is in compliance.  

It’s okay if you’re not sure where to start. I’m here to share with you my five favorite tips for entrepreneurs who are looking to start getting their finances in order. 

Separate Your Business and Personal Finances

Not keeping their business and personal finances separate is a huge mistake I see so many entrepreneurs making, especially in the beginning. There are a few reasons you should keep these two areas separate. When your business isn’t generating a whole lot of income, it’s easy to think that the most simple way to manage it is by having it go directly into your personal account. BUT what will you do when you are generating more income and you’re stuck trying to navigate how to pay your VA and podcast manager and whoever else on your team out of your personal checking account…

A second reason is because your business is your BUSINESS! It’s not a hobby or some little gig you do on the side. Having a separate account for your business and having separate checks (do people still use those?!) and credit accounts open specifically under the name of your business will add an additional layer of professionalism to your business.

Last but not least, it’s important to keep your business and personal finances separate for… taxes! We will go into taxes more in a minute, but a major benefit is to take advantage of tax deductions, including writing off business expenses.

Establish an Emergency Fund

            Contrary to popular belief, emergency funds aren’t just for your personal finances. Your business will go through periods where the income will fluctuate greatly. If you’re in a niche where you can prepare for these deviations in income (you know, those months you make $100 when you’re used to making $3k?) that’s fantastic! But sometimes those drops aren’t as easy to plan for and seem to come out of nowhere. What’s the best way to make sure you and your business are secure and stable throughout these periods? An emergency fund!

            So how does one decide how much to keep in their businesses emergency fund? Here are three things you’ll want to keep in mind:

1.    How much you’re spending monthly – this includes all behind the scenes costs, monthly commitments including any masterminds or coaching, and employees (VA’s, copyrights, etc.)

2.    How many streams of income your business has – do you sell website design packages as well as templates? What about ongoing coaching or website support?

3.    How much you’ll need to feel comfortable – this is a personal one and will vary based on YOUR own money experiences. Especially as you’re starting out, it’s okay to want more in your emergency fund. As you generate more consistent streams of income, whatever you deem to be excess can be allocated elsewhere.

Taxes

            I want to start this section with a disclaimer. As entrepreneurs we pride ourselves in being able to manage all aspects of our business (until we realize we actually can’t if we want to grow), so please take a deep breath before reading this next sentence.  If you have the means to invest in a CPA, they can be highly beneficial and an expense that ultimately saves you money in the long run.

            Why? Managing the taxes for a business is much different than your personal finances. Ultimately, it’s a decision worth considering. There’s some things you’ll want to consider if you’re choosing to not work with a CPA:

1.     Since your taxes won’t be coming directly out of your paycheck as they would in a corporate job, you’ll want to be sure you’re paying quarterly taxes.

2.    It will be in your benefit to read up on the variety of deductions that exist for small business.

What can happen when you don’t pay taxes as a small business owner? Ask Nicholas Cage, Wesley Snipes, or Dolce and Gabbana. IRS Audits, back taxes, and penalties may need to be added into your business budget. In other words, learning to pay your taxes is an essential part of your entrepreneurial journey!

Keep All Documents and Receipts

            Since the majority of our work is online or at least on the computer, making sure that you have an organizational method for managing your work is essential. One idea for doing this is to use Google Sheets or Excel to keep track of your income and expenses, as well as just manage the budget for your business in general!

            Even with an email account that is separate for your business, it can be helpful to create different folders for things such as receipts and invoices.

            If your business requires you to purchase physical items from stores, you’ll want to hang onto those receipts too. Either designate a folder to these items or scan them onto your computer and save them in a file with your other business documents.

Use Outside Services to Collect Payments

As we all know, money can elicit all sorts of emotions from different folks, from happiness to fear to anger and so on, depending on who you are and what your experiences have been. One way to limit the tension that can arise from your emotions around getting paid (valid emotions!) and engaging with clients for payment is to have an outside service (or person) collect payments.

            This will require hiring someone as a sort of “business manager” or whatever you want to call them, who will ultimately serve as a mediator between yourself and your clients when it comes to payments. They will also be the person to get late payments from clients and communicate changes in your prices to your clients.  You’ll be able to focus on your business relationship with your clients without the tension, stress, and frustration that handling the financial aspect of your relationship can sometimes bring.

Summary

Taking control of your business finances is an essential part of being a successful business owner. If you’re wanting to get started in the process, start by implementing these five things: separate your business and personal finances, establish a business emergency fund, hire a CPA or learn how to do taxes for your small business, keep all documents and receipts for business purchases, and use an outside service or person to collect business payments from clients. While your business finances may seem like a second (or third) language sometimes, by implementing these tips you will be well on your way to feeling confident with your businesses money.