Let us take a wild guess…when you started your business, learning how to manage your business finances probably was *not* at the forefront of your vision board.
We get it. 😅
It can be just so overwhelming.
But whether you consider yourself a numbers person or not, learning how to manage your money as a business owner is key to running a successful and profitable business.
So let’s get into the seven tips you can implement to take your business finances from hot mess express to #flawless. 💁🏽♀️
Keep It Separate
We’ve said it before and we’ll say it again…
You are not your business, and your business is not you.
Your business is a separate entity and it should absolutely be treated that way.
You can do this by:
- Setting up your business as a Corporation or LLC to protect your personal assets
- Opening a separate business checking account so you keep everything separate
And then, once you’ve opened said bank account, it’s important that you maintain this financial separation.
Pay business expenses from your business account, and personal expenses from your personal account. Do.not.co-mingle. 🙅🏽
Not only will this save your booty come tax time (because everything’s neatly organized in separate accounts!) but keeping things separate will shield you from personal liability.
If you treat your business finances and personal finances as one and the same, the courts could argue that your business isn’t truly a separate entity.
And that means if someone ever came after your business…all your personal assets would be on the hook too. 😳
Keep it separate to keep your business running like a lean, mean (legally sound) machine. 💪🏽
Get a System
Be honest…have you ever had one of those weeks, or even months, where you completely avoided your finances?
We’ve all been there. 🙋🏽
The key to stopping financial procrastination and achieving financial wellness is developing a money system.
It doesn’t matter what system you use. You’ve just got to find one that works for you…and then stick to it!
Whether you use Quickbooks, Freshbooks, Wave Accounting, or a simple spreadsheet, it’s key that you commit to tracking and monitoring your monthly finances.
The more often you can look at your finances, the better. We recommend having a money check-in with yourself at least weekly, but if you can commit to daily, that’s even better!
Take note of:
- Incoming income
- Outgoing expenses (recurring and one-off)
- Your profit margins
If you’re not used to regularly looking at your finances and organizing them, this step might feel overwhelming at first. It might even feel uncomfortable to be getting up close and personal with your money!
But the more you build this habit, the more you’ll realize just how transformative it is for your business. You’ll start to be far more intentional with your finances, and pretty soon you’ll see your bank account starting to grow. 🌱✨
Pay Attention To Profit
As a new business owner, it can be easy to get caught up in the whirlwind of expenses required to start and grow your business.
And while it might be okay to be operating in the red for a few months while you’re getting your business off the ground, pretty soon you need to start prioritizing profit.
Profit is the lifeblood of any business.
For many business owners, profit is an afterthought. They pay all of their expenses, take their cut for their salary, and whatever’s leftover is the month’s profit.
Or maybe, you haven’t even gotten into the habit of paying yourself at all.
Your business bank account is just one big lump sump from which you make occasional transfers to your personal account.
If this is you, it’s time to get organized and intentional.
You can follow the popular Profit-first method, created by Mike Michalowicz, to increase your business’s profitability and organize your business finances.
In the words of Michalowicz, profit is not an event – profit is a habit.
His method helps you build a habit around your business profits.
Put simply, the method calls for a change in thinking around profit. Rather than profit being what’s left over after paying all your business costs, it’s at the forefront.
Start by taking away a percentage of profit from every sale you make.
Your expense budget is then determined by how much you have leftover once you’ve taken your profit. Hence the name, profit-first.
The Profit-First method also advocates for keeping separate accounts for all of the different categories in your business, such as profits, taxes, operating costs, owner’s payments, and revenue.
It’s a completely different way of thinking about your business finances, and one that takes a little getting used to at first. But once you adopt this system, you’ll have a business that is in the green, each and every month. 🤑✅
If you’re reading all of this and thinking to yourself –
“I recognize the importance of learning how to manage business finances – but I just don’t realistically see myself implementing these habits and strategies every month.”
Or maybe you’re thinking, “I have a decent system for managing my finances, but I just don’t feel like this task is within my zone of genius”
Then why not consider outsourcing?
Hiring a bookkeeper can easily be one of the best investments you’ll make in your business.
While they might cost a few hundred dollars a month, they can easily find you thousands of dollars in savings a year. They’ll help you make sure nothing is slipping through the cracks and that you’re keeping on top of your financial wellness.
A bookkeeper will take care of all those small money details, and then meet with you to discuss the insights, trends, and ways to keep more money in your pocket!
So if you know you won’t be able to keep up with your money maintenance, consider paying a pro to do it.
Looking for qualified bookkeeping professionals? Check out Crème de la Crème, the verified business directory of coaches and service providers powered by Coaches & Co!
Don’t Forget About Taxes
We’ve all heard those horror stories…😱
About entrepreneurs forgetting to save for taxes and being hit with a giant bill from the IRS.
Don’t let that be you!
When you properly account for taxes each month, they don’t have to be scary.
They can be easy as pie. 🥧
The best way to prepare for tax season and know exactly what you should be saving is to develop a relationship with an accountant.
By having a pro in your corner, you’ll avoid any nightmare tax season scenarios and instead have them handled like a boss. 😎
And if you’re looking for a good place to start, we published a blog a while back with a tax preparation checklist for entrepreneurs!
Pay Your People
Your team members aren’t just a cost, they’re an investment in the future of your company.
They’re quite literally spending their time and energy to grow your vision. ✨
Make sure that you pay your team members well, and you pay them on time.
Paying your team should always come first.
If that means your salary as the CEO has to wait one month in order to make payroll, so be it. Paying your people should always be your first order of business.
In order to prevent this scenario, however, take inventory of your finances when bringing on new hires. Make sure you have at least 3-6 months of their salary in the bank so you’ll never find yourself in a position where you have to stress about paying a team member!
How you pay your team will depend on whether they are an employee or a contractor. Contractors should be paid via accounts payable, whereas employees should be paid via your company’s payroll system.
Remember that if you’re working with employees, you’ll be responsible for withholding taxes, whereas independent contractors are responsible for managing their own taxes.
Make sure you grab either our independent contractor agreement or our employment contract template that includes these important clauses!
Consider Your Big-Ticket Investments
As your business grows and expands, you’re going to need to invest in big-ticket items to hit your next level of success. 💪🏽
From hiring business coaches, to joining group coaching programs and masterminds, to investing in service providers like web designers and systems experts, there are a million ways to invest to uplevel your biz.
But if you want to learn how to manage your business finances like a pro, you need to learn how to be strategic and intentional when it comes to your investments.
Make sure to ask yourself the big questions, like:
- Is this investment going to result in a positive ROI (Return on Investment) for the business?
- Do I have enough capital/resources to sustain this investment? (This is especially important if the expense is recurring – such as a team member or a monthly mastermind fee)
- Do I have the time and mental energy to devote to this investment right now?
By asking the right questions, you’ll have fewer instances of investment regret and keep more coin in your pocket.💰
It’s also a good idea to start planning ahead for big-ticket items and create a business savings account. That way, you can save up for big expenses over time and better manage your business cash flow.
Managing your business finances shouldn’t be intimidating and it doesn’t have to be difficult either.
Once you set up a good financial system, you’ll wonder how you ever lived without it…we promise!
By keeping these tips in mind, you’ll find a newfound sense of peace that comes with having organized accounts. And not to mention, you’ll find yourself keeping more of that hard-earned coin for you, sis.
Because you deserve it! 💛
Ready to feel confident about your finances? Check out our ready-to-use, lawyer-approved, plug-and-play legal contract templates, so you can build your business while staying Profitable & Protected™✨
Not sure where to begin? We’ve got you. Grab our free Legally Launch Handbook to get the legal lowdown on everything in entrepreneurship, without the confusing mumbo jumbo. We’re serving it up straight and to the point. (Heads up: It’ll forever transform the way you view your client relationships!) Grab your copy now.
*The information presented in this blog post is for educational & informational purposes only. This should not be a substitute for customized legal advice from a licensed professional in a private setting. If you need legal advice, please consult with an attorney. This is not a law firm.