Organizing Your Business Finances

To be honest, talking about money makes me understand why Michael Scott jumped onto a train to run away from his financial problems. I really hate dealing with money, and I'm not good at it which makes me feel a little insecure even talking about this topic. Like who am I to tell you all how to handle your finances when I haven't even looked at our budget since January (whoops). 

As creative people, a lot of us aren't great with money, and if you're like me and even thinking about it makes you cringe, I get it. I've had to force myself to learn how to deal with this issue, especially as our business has grown. So, please know that I do not have this all under control, but it really is so important and I want to help you get off the train and feel comfortable and confident about your finances from here on out. 

Here's where I recommend starting:

Separate Your Business and Personal Bank Accounts
If you haven't done this yet, stop reading right now and go make a separate bank account for your business. It doesn't have to be specifically a business account and it doesn't even have to be at a separate bank, the important thing is that your business money is completely separate from your personal money. Not only will this make it easier for organization and tax purposes, it will also help you avoid any issues if you ever get audited. There are so many options for banks out there, but just look for something with low fees and good customer support. We use Chase, but we're currently looking into other options including credit unions since Chase has a lot of fees that we don't really appreciate. 

Once you have a separate bank account, open a credit card specifically for your business and try to only ever charge business expenses to that card and personal expenses to your personal card. Trust me, this is super important. Don't listen to anyone who says it's fine to mix funds, it's not, and it can get really messy down the road. Also make sure to pay off your credit card every month, just like you would with a personal card. 

Track All Expenses and Keep Your Receipts
Once you have your bank account all set up and ready to go, find a way to track and categorize your expenses, as well as money that comes in. This could be as simple as a spreadsheet, or it could be a software like Quickbooks (what we use). The reason I like to use a software is that it connects to our bank account and credit card so I can then just select the category and quickly see our profit and loss. Our accountant has access so she can go in and reconcile and calculate taxes easily. It's also helpful for invoices because I can see when things are due and it will automatically send reminders and apply late fees. If you're early in your business, all that might not be necessary, but it's worth looking into.

In addition to tracking everything, keep all your receipts. This is something that I still struggle with, but you'll want to keep them in case you ever do get audited. I just have a file folder for each year and I stuff them in there, but I'm sure there are much more professional ways to keep them organized haha. 

Create a Budget
Remember how I said that I haven't checked our budget since January? Yeah, I'm really bad with budgets (and that might be an understatement) haha. But, my goal this year is to really focus on this and be super smart with our money so I will be going back through and adding everything from the last month. I do all of this in a google spreadsheet so that I can add the columns and see how much we have left to spend that month. You could also see this in Quickbooks or your bookkeeping software, but I keep those categories more general and my budget spreadsheet more detailed. For example, I list out every software or subscription we have like Adobe CC and Dropbox in our budget but in QB they're all grouped into software. This is what makes sense to me, you can do this however you want, but it's important to see where your money is going so that when you set your financial goals you know how much you need to make, or where you could cut some spending. 

Set Goals and Check On Your Finances Regularly
You know we love goals (check out our goal planning guide here) and financial goals are some of the most important that you will set. After all, this is a business, and you need to make a certain amount to continue running your business and thriving. I'm one of those people who would rather never look at my bank account and just hope for the best, but I've discovered that having specific money goals and then checking in on those goals at least once a month has helped our business grow so much. I also try to stay on top of categorizing expenses and budgeting so it doesn't get out of hand (like it is right now haha). I used to have a weekly meeting with myself to do both of those things and I will be implementing that again ASAP. 

Always Set Aside Money for Taxes
*ATTENTION* If you take nothing else away from this conversation except get a separate bank account and set aside money for taxes, I will be happy. There is literally nothing worse than having the shock of what you owe hit you like a ton of bricks and then on top of that not having the money to pay when tax time comes. The amount that you owe will vary depending on your state/country/deductions/income but I recommend speaking with a professional to figure out what you should be setting aside and then set aside that percentage every single time an invoice gets paid. Every single time. Put it in a separate account and do not touch it. 

If you have extra money leftover when taxes come around, hooray, you get a bonus! But even if that's not the case, you will rest so much easier knowing that you will not be surprised by taxes and you can pay them with ease. 

Get an Accountant
This piece of advice is somewhat dependent on where you are in your business journey. I do recommend seeking professional financial advice at any stage, but if you are registered as a sole proprietor, it will be somewhat easier to do your own taxes. I would still suggest hiring an accountant if you can afford it, since it will make your life so much easier and decrease your changes of auditing, but it's also more easily diyed (is that a word?) at that stage. However, if you are registered as an LLC, do not try to do your taxes on your own. It will be essential for you to hire someone to help you through that process, and if you have a good accountant, they will also help to save you money through deductions in the long run so it's very worth it.  

Read Profit First
I read Profit First super early in our freelance journey, and I am SO glad that I did. It really defined how I separate out our money and make sure that we pay ourselves which is really key in running a sustainable business. I won't go into this here because you can hop over and read this whole post on it and also watch this IGTV but consider this your homework (after you get that separate bank account!). 

There you have it! If you have any other money tips, please share! I would love to hear about how you handle your finances. 

Is it the weekend yet?
Elle