Do you have a way to manage your finances? Starting your own business means you’re in charge, yet I’m surprised by the number of business owners who avoid looking at their bank balances and can’t tell me what their average monthly expenses are.
Creating a finance system early on in your business, even though you may not yet have much in the way of income or expenses, helps you to build good habits when tracking and reviewing your finances in the future.
I started off managing my business finances by adding extra worksheets to the personal spreadsheet I’ve been keeping since I learnt how to use excel at University. Now, as my transactions increase, I’m going to switch over to bookkeeping software – research is currently underway to choose the best one for me.
The important thing is to start. Use a spreadsheet or a finance app but start today.
6 reasons to manage your finances
1. Make better decisions as you know exactly what your income and expenses are.
2. Clarity on which services are the most profitable for your business so you can easily see what to continue and what to stop.
3. More confidence talking to a bookkeeper or accountant.
4. Know exactly how much you need to sell to reach your income goal, which leads to better, more focused marketing.
5. Feel confident budgeting and tracking your income and expenses.
6. Realise that being the bottle neck in your business when it comes to your invoicing is not serving you.
The system I currently use to manage my finances looks like this:
1. At the start of each financial year I create my budget for the year and update my balance sheet (sometimes called Statement of Financial Position).
2. Pick trigger points in each month to update my finances. I’ll update my spreadsheet when my credit card statement arrives, and at the end of the month.
3. Put any trigger dates in my calendar as a recurring appointment.
- On my trigger dates I update my spreadsheet so I can see how my actual expenses are tracking against my budgeted expenses. I track my income as soon as I receive it. It’s my way of welcoming that money into my world.
If you have used a system to manage your finances throughout the year then, at the end of your financial year, you’re in a great position to do your tax return (or have your accountant do it for you) as you’ve organised everything throughout the year. My tax return only takes me an hour or two to do and it’s stress free as I have all of my information to hand.
Let me know in the comments if you have a solid system for your finances. Also let me know if you have a favourite book keeping software.