Starting a business—but not sure how to get your company finances in order? Don’t be intimidated. Many of the business owners and freelancersI’ve worked with once thought of themselves as creative types who lacked financial acumen. And now, they’re business owners with great products and financial savviness.
Follow these simple starter steps to streamline your money habits, so you can focus on your business dreams (not your bank statements).
Open a new checking account for the business. It’s so easy—it should be the first thing on your to-do list. Ask your bank to help you set up the best account for your business needs. They’ll be happy to help, and many banks offer special programs for small businesses. Plus, when tax time comes around, keeping your personal money separate from the business will make it much more straightforward to sort out your business expenses and deductions, and might even mean you end up paying less in taxes.
Create a tax savings account that will allow you to cover your tax expenses come April. Ask your accountant for your tax rate, and then take that percentage from every payment you receive and put it straight into your separate tax savings account. This way, when tax season rolls around, you’ll already have enough money set aside to cover the annual expense. It might even earn some interest in the meantime! Every little bit adds up.
Contribute to your retirement account regularly, even if it’s a mere $100 per month. A 47-year-old woman I recently spoke with told me she’d been earning $100,000-plus for over 15 years—but she’d never opened a retirement account. Don’t be like that. She now has much less time to save and to accumulate interest on her savings—and she’s bitter she missed out.
So start now. Set up a ROTH or SEP IRA at a no-load mutual fund company like Fidelity or Vanguard. You won’t miss the money that much in the moment—and decades from now, you’ll be grateful you took my advice.
Clients come and go, projects ramp up and shut down. You, on the other hand, still have to eat and buy shampoo. And that means you need to plan ahead. Setting a weekly spending amount will reduce your stress during times of transition.
But that doesn’t mean you always have to live on the cheap: you can set one amount to spend while times are good, and decide on another for the slow seasons. Doing that planning ahead of time will help you know what you can afford and when, so you won’t have to guess your way through your budget.
Many of my clients have complained to me about not getting paid. Why not? Often because they’ve been slow to send out their invoices, and are still waiting to receive payment for services completed weeks or months ago.
No, invoicing isn’t the most energizing part of being an entrepreneur—but it is how you get paid. So get your invoices out of the way first thing in the morning each day, and then focus the rest of your day on marketing yourself and bringing in new business.
This is typically the point in a meeting when my creative clients give me a blank stare. But intimidating title aside, understanding a profit and loss statement isn’t that hard—and it’s tremendously important to being a smart business owner.
A profit and loss statement gives you a clear snapshot of your expenses and revenue. It tells you where your best business came from, where the greatest percentage of your money is going, and how much to project for future expenses. So don’t brush it off—paying attention to this report will ultimately pay off.
If you’re not financially inclined, you can simplify things for yourself by hiring a good bookkeeper to create your profit and loss statements for you. Then all you’ll have to do is review them, evaluate what they’re telling you, and figure out how to steer your business accordingly. And you don’t need a degree in finance or business to do that.
Now’s the time to jump into the entrepreneurship game—and don’t let your lack of a financial background stop you. Over the past three decades, the growth of women-owned businesses has skyrocketed, and for the last five years women have consistently launched new enterprises at twice the rate of men. So take these tips to simplify your business accounts, get your finances in order, and get back to doing what you love: the parts of your business that inspired you to launch in the first place.