2021, the year we have all decided to make some changes. In having a small business, it is very important to keep your finances in order and organized. If you are like most people you are just happy to be in business and making some money. Getting a handle on how to organize your financial business will free you up to do the things you love and probably the reason you went into business for yourself in the beginning. Most importantly, by organizing your finances you are actually improving your products and growing your sales.
- Keep it separate. That new backpack for your kids isn’t a business expense, but your business credit card was handy so you used it. Sure, you can pay back your business for a personal expenditure, or the other way around, but if you’re going to do it right you actually have to record an accounting transaction. Things get complicated fast, and you don’t need that headache. By keeping separate bank and credit card accounts for business and personal, you’ll save yourself hours of work and make it easy to keep track of deductible expenses in one place. Research the bank that has the services that work just for you and make it where your business account is at.
- Call in a pro. Since the days of the abacus, accountants have been trusted and respected allies to small business owners everywhere. Their intimate knowledge of the profession as well as tax laws in their jurisdiction will save you money almost every time. I know how tempting it can be to save a buck and do it yourself, but it’s almost never more cost-efficient in the end. An accountant will almost always find more deductions and keep you penalty-free. On that note, the cleaner your records, the fewer billable hours you’ll have to pay, so make sure you’re organized year-round.
- Pencil it in. Actually, use a pen. A permanent marker even. Set aside about 15 minutes every week, that’s the equivalent of just one social media visit every seven days, to have a financial planning meeting, known as time to organize your finances, and don’t let other things take priority during this time. You’ll have more insights into your business, be able to make more informed financial decisions and have everything organized when tax time approaches.
- Keep all of your paperwork in one place. Unless you have a scanning system, papers will always pile up. There are many methods to filing, but none of them work if your paperwork piles up in different locations. Depending on the size of your business, invest in a divided file folder or a filing cabinet. Make monthly labels and you are in business. Start with big files by type (receipts, invoices, communication, etc.) and continue to divide as needed. If that method is too “outdated” for you, you can consider using an Excel spreadsheet or using online resources.
- Consider your expenses. When you’re looking for insights into your businesses spending, don’t forget to properly track what is likely one of your biggest expenses: labor. Whether you’re paying a full staff or you’re the only one on the payroll, make sure you’re tracking the costs of wages, benefits, overtime and any other costs associated with labor. Also think about the actual things you need to spend money on. Do you need a new computer program or is the current method you are using still just right for you?
- Finally, don’t forget to get paid. This one seems pretty obvious, but you would be shocked at how many small business owners don’t properly track invoices and customer payments. If you’re not keeping proper records that you can make sense of at a glance, it could be months before you realize you have outstanding invoices. You could be collecting payments late, or missing some altogether. Make sure you’re properly tracking all payments due and recording when each invoice is paid, how long customers generally take to pay, and which customers you’ve had difficulties collecting payments from in the past.
Sharetha Marshall is vice president of professional development for Black MBA Indianapolis Chapter.