When you run your own business, your money is so connected to your quality of life. If we really want to treat ourselves well, looking after our finances is one of the best things we can do.The three tips I’m about to share will help you treat yourself and get on top of your business finances.
Separate Your Accounts
If your business and personal finances are mixed together, any financial information you need about your business is going to get murky, fast. Clear financial information is a must for tending to your business finances and making decisions.
Separating your accounts also makes things easier at tax time. Having that information readily available means you're less likely to give up and overpay on your taxes. This means more profit for you.
Understand Your Numbers
Look at your financial records for the year. Figure out what products, services, or other sources brought in the most revenue. Identify which months you made your largest and smallest amounts of revenue to understand the rhythm of your income.
Do the same for your expenses. Did surprises come up? For many people, taxes are a surprise expense. You can prepare more effectively by looking at last year's tax expenses and planning for this year’s taxes.
Look at your total revenue. Did your business pay you money? Too often I see business owners not reaping the rewards of running their business. In the Profit First system, Owner's Pay and Profit accounts are used to divvy up income and ensure that the owner is getting paid. This is called paying yourself first. Separating your pay from your operating expenses and taxes is key to a personally rewarding business.
Analyzing your finances creates a financially streamlined business. Strategizing for surprise expenses and taxes, offering more of your most profitable products or services at the optimal time of year, and remembering to pay yourself all contribute to financial success.
Set Informed Income Goals
Your business exists to support you; to fulfill your needs. If you don't have a clear picture of what those needs are, it can be difficult for your business to fill them.
Take a look at how much money you’re spending in your personal life every month. Dig up the past three months of your bank/credit card statements. Go through line by line to see where your money is going.
Once you've got your totals, you have a realistic picture of how much money you need on a monthly basis. At this stage, you may want to look critically at your lifestyle, and see if there's anything you're interested in culling. You can create a budget or spending plan if needed.
You now have a complete picture of your financial needs. You can set informed income goals for your business that are designed to meet those needs in your personal life.
Following these three processes may take some time, but taking the time for financial self care will eliminate stress around your business finances.
Angela Keller, At Peace with Money, Chapter 111
Angela Keller is a Profitability Coach and Proactive Bookkeeper at At Peace with Money.
She believes that all small business owners deserve a life of abundance. She has created her Profitability Coaching program to help her clients clarify their goals and create a sense of peace with their money systems so they can do just that.