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January is Financial Wellness Month, so along with all the normal New Year’s resolutions about health and weight, January highlights the state of your finances. It’s my experience in working with hundreds of self-employed small business owners that money and their business finances are not usually top of mind. In fact, I’d say that at least half the self-employed business owners I know actively avoid talking about or monitoring their money. I’ve seen self-employed people ignore their financial picture pretty much altogether, until they get into a severe financial crisis.
We’re in business for ourselves so that we can do what we love to do in service to others. And the phrase “in business” means that we intend to do what we love in such a way that our customers will be served and we will be profitable. Not many of us can claim that we don’t need to make money in our business, yet when I sit down with clients I often find that they’ve ignored the financial wellness of their business. I hear wishful thinking type statements like “oh, I figure the business end of things will take care of itself” or “I don’t want to get tied down paying attention to the details of business” or even “I just don’t have a head for business.” Excuse me? This type of head-in-the-sand behavior reeks of magical thinking, and it can lead you lose your business.
Here are some of the common symptoms of financial disease in a business.
- Poor cash flow which is solved by running the business off of personal credit cards.
- No sense of what percentage of income is needed to cover your operating costs.
- Bookkeeping which is months behind because the owner insists on doing it herself to save money, or refuses to consistently turn receipts into her bookkeeper.
- Quarterly taxes are unpaid.
- No basic budget pulled together that gives a guideline for things like travel, conferences, or new equipment.
- No regularly scheduled weekly time to review your income and expenses to date.
If any of these sound familiar to you I urge you to work on the financial wellness of your business every bit as hard as you work on your own physical wellness. Here are the basics that I recommend for every business owner.
- Hire a bookkeeper before you open for business, and get one that specializes in small business bookkeeping. Be faithful in turning in your expenses and income to her so that your financial picture is up to date. If you do not have a bookkeeper and you’re in business go get one right now!
- Review your income and expenses statement at a set time each week. I personally like to do a quick review on Friday morning, to see what income I’ve had and from what source as the week draws to a close. You might prefer first thing in the week – it doesn’t matter, just do it consistently, once a week.
- Have your bookkeeper tell you what percentage of your income goes to operating costs on a quarterly basis. Keeping your operating costs under control is the single simplest way to give yourself bigger income from your business.
- If you do use a credit care to buy supplies or travel for your business make sure that you have a business credit card, don’t co-mingle your personal and business funds.
Of course, there are many other topics about managing your money that are important to a business owner. But if you need to improve your financial wellness just taking the four steps I list above will get you on the right track. You can start right now and by the time Financial Wellness Month is over you will have improved your business substantially. Keep in mind that what we pay attention to improves. So paying appropriate attention to your business finances will actually improve your bottom line, and it will help you step into being a true businesswoman, too.
If you find see yourself in the “symptoms” list and need support to take the first step, you can invest in a One and Done hour with me and I’ll help get started. To find out more about that, just click here and you’ll get all the details.
Twitter: mitchtublin
says:
Sue,
We should all focus on what we are good at and hire in to cover the rest.
Agree with you, if the numbers and the business side, tracking the money,
is not your cup of tea, get someone on board fast to make it their business
to do it for you.
Really good post Sue! I feel pretty good about my accounting and bookkeeping but your list makes me see that there is always room for improvement! Great suggestions!
Twitter: jenniferbourn
says:
Sure – This is great advice! When I started my business, we just kept track of everything in a MS Excel spreadsheet … it worked, but once we switched over to QuickBooks online things got much easier!
I’d also add that you MUST have a great CPA. With our first CPA, we had one year where we had to pay more than $25K in taxes and contributed nothing to my retirement … it was awful.
Luckily we were recommended by a friend to an amazing CPA and Financial Advisor, and the next year I contributed the max to my retirement, made more money than ever before, and received a tax return!
Jennifer,
Totally agree about having a very good bookkeeper and/or CPA who is experienced with SMALL business owners. Glad you found one who is watching out for you.
Sue
Twitter: TiffanydeSilva
says:
Very sound advice, Sue. Generally speaking, ignoring the financial side of business is very common among self-employed professionals and entrepreneurs. Let’s face it, most folks don’t get stoked over bookkeeping and number crunching. However, I totally agree that you should get help in this area if it really isn’t your strong suit. Ignoring it or letting things go unattended to is not an option, unless you don’t care about the survival of your business in the long run. Also, if you don’t know your numbers, you are playing a guessing game each day rather than running your business strategically.
Tiffany,
I so agree that “head-in-the-sand” isn’t strategic. It is survival. And that never lasts long-term.
Sue
Thanks Sue! I am certainly doing better managing my finances then I was when I started my business 13 years ago but I still don’t sit down weekly and look at my income and expenses. That would help me make better decisions week to week. I appreciate that tip! Also, I’ve done your once and done and IT”S AWESOME. Gave me exactly the clarity and direction I needed.
Thanks for your compliment about the One and Done, Tara. And glad to hear you will watch your $$ weekly now, too.
Sue
Such an important subject! I myself am guilty of getting overwhelmed by bookkeeping. And I always promise “I’m going to do it differently the next year” every January because I start prepping for tax season and there’s so much more to do!
Twitter: KatherineCHE
says:
Great tips, Sue! I have a daily money form I monitor that is tied in with my monthly and yearly goals… it’s whatever works for you! But, monitoring is key!
Love and Success,
Katherine.
Excellent post Sue! You can’t run or grow a business unless you know where you stand financially. I think so many entrepreneurs love their business idea, but the actual operations of running the business (like finances)… not so much.
The payoff (literally) as you say is “What you focus on, expands.” Focus on the financial health of your business and it will become even more financially fit!
-Lisa
Yes, I love the “focus = expansion” thing, Lisa.
Sue P.
Twitter: MarketingMel
says:
These are excellent tips Sue! Thanks for bringing up the all important financial start to the New Year!
This is an excellent checklist for the Startup, Emerging or Expanding Entrepreneur. These are some of the major financial “checks and balances” for maintaining and growing your business which are so often overlooked and/or non-existent. And, these practices will save money and time in the long-run. Thanks!…pep
Hi Pat,
Yes, in the long run they save your business. In the short run they constantly make you aware.
Sue
Twitter: doreenrainey
says:
I have to admit, I’ve been guilty of most of those at some point in my business. Great reminders of putting things in place to make sure everything stays in order and you have a clear understanding of where you business is.
Thanks, Doreen. I think we’ve all been guilty now and then – but best to steer clear!
Sue
Twitter: www.OnlineBizU.com
says:
This is so true, Sue. Let’s just say I have resembled those business owners in the past..LOL Last year I found an accounting software service that I love, Wave Accounting, https://www.waveapps.com/, that simplifies much of your bookkeeping, whether your like to DIY or hire a bookeeper. I’m loving it!
Hi Donna,
I’m glad you found accounting that works for you.
Sue
Twitter: uqpower
says:
You raise such critical points here – for many business owners who don’t watch their numbers it’s like playing a game of sport without keeping score!
I like your tip to have your bookkeeper tell you what percentage of your income goes to operating costs on a quarterly basis and have just requested mine add that to the monthly reports she compiles for me already!
Heidi,
So glad you have added the “operating costs” check-in. It will change things!
Sue