Pretty much everyone I know has hang ups about money, and despite having built a very respectable business for myself over the last 9 years, I have repeatedly wrestled with (hang up related) procrastination that leads to epic suffering at tax time. This year I'm changing that, starting with Q1! Today, as part of my work via the Office Champions program, I'm sharing 6 financial things to do to make being a small business owner less painful.
1. Embrace being more knowledgable. Let's start big picture. Over the last couple of years I have learned from Jon that it is more powerful to embrace financial knowledge (good or bad) that fear it. Knowing what works and what doesn't will help you grow. The next 5 steps will all help you become more knowledgable about your finances.
2. Implement an accounting system you’ll actually use. Obviously, you need a way to keep track of income and expenses. I know many people who prefer accounting software, but I knew there would be more barrier to getting organized if I bought a program that I would need to sit down and spend time figuring out. Plus, I already knew how I wanted to track things and it was fast and easy for me to set up a system using Excel so I was ready to jump in and get organized more quickly.
3. Declutter your paper process. In the past, paper office clutter has totally overwhelmed me. Go paperless with bank and credit card receipts and keep receipts at bay via digital tracking. For example, I’ve recently started exploring OneNote, which is super handy for cataloging expenses. Just snap a picture, annotate the receipt (e.g., with client name) by typing or inking, and then you can search text within an image when you need to call it up.
4. Form a system for incoming/reconciled paperwork. For remaining paperwork, form a simple system. I’ve been working on revamping my office (more on that to come) and realized that one thing that made me resent financial processing was having an inbox on my desk (taunting me!). Now I simply keep a folder in my top drawer for paperwork I need to reconcile and once reconciled, that paperwork moves to my filing system in my closet.
5. Reconcile your finances weekly. This step is CRUCIAL. Prevent the overwhelm factor at tax time by reconciling your income and expenses (e.g., receipts, credit card, business banking, pay stubs, etc.) weekly. I set this as a recurring to-do item and it just takes a few minutes a week to keep on top of it!
6. Do a quarterly financial check in. Assuming you are doing #5, this step will be a piece of cake. Tally up your income and expenses. The income piece is especially important if you pay estimated taxes and tend to have variability in your flow. In the past, I have just paid a fixed amount each quarter without accounting for growth (because I didn't make true quarterly estimates) and have owed a painful amount at tax time. Also, embracing the knowledge (#1 above) of how your business is doing will help you evaluate whether you need to ramp up your efforts, adjust spending, or simply celebrate a great quarter.
I’m thrilled to say that thanks to this process I've developed I’m totally on top of my quarterly finances for the first time in 9 years of freelancing and I plan on celebrating a great Q1, likely with burrito and cookies. Yay, burrito and cookies! And yay (in advance) for not suffering at tax time next year!
Disclosure: This post was inspired by my role as a compensated Office Champions ambassador; ideas and opinions are, of course, my own! For more in this series, check out my 9 tips for digital decluttering!
Image credit: vector by FreeDigitalPhotos.net (text added by Christine Koh)