Episode 008 - Bitch Better Have My Money
Schedule time each week to work on finance. Pencil it in like a real meeting to you stay on top of it.
Terms you should know:
Gross vs Net
First things first, you need to get a business bank account.
Stop mixing personal expenses with business.
Set up a system to keep track of:
Accounting and bookkeeping records
Permits & licenses
Employee / Outsourcing records
Use an accounting software
Even if you just have one client right now, putting a bookkeeping system into place is important. It doesn’t have to be a fancy program and in fact, a well-structured Excel spreadsheet will serve most businesses just fine. When you get into the habit of recording your income and expenses on a regular basis, it sets you up for success later on in your business when you have more transactions. If you put this off until your business is booming, you won’t have much time to spend on figuring out the best bookkeeping process for your business. Then you’ll likely put off your bookkeeping until your taxes are due, which can be very stressful.
Do you need to send invoices?
What level of income & expense tracking do you need? How granular do you want to get?
What kind of financial reports are available?
Do you have clients that you need to track? What about vendors?
Do you have employees? Is payroll processing supported?
Do you need mobile access? What about multiple users?
Can your credit card processing be integrated?
What about integrating 3rd-party e-commerce platforms?
Do you have inventory to manage?
Cash flow forecast
Difference between cash + accrual
Cash is king. Without cash in your creative business, you can’t pay the bills, pay your people, pay your taxes and pay yourself.
A cash flow forecast is like a budget that you’d use for a personal project like renovations or a wedding, but it is a live document your business that forecasts what your future sales and costs are expected to be. Your cash flow forecast will show you how much cash you will have on hand or if you will be short of cash.
Having a solid cash flow plan can show you months in advance what your bank account balance will be based on your business budget (cash out) and sales you expect to come in (cash in).
This is a great way to see if you need to increase marketing months in advance for a certain product or service you need to sell more of so you don’t run out of money. Or if you need to drastically decrease expenses. Or increase your prices.
Why you need to budget and the difference between cash flow forecast
A budget isn’t something you use or put in place when you’re just getting started or when money is tight. A budget is giving your money a purpose and plan. It doesn’t matter if you’re barely making the bills or bringing in millions every year. If you don’t put a budget in place for your money, you can easily overspend causing financial hardships in your business and personal life. I recommend setting an overall budget for the year then breaking that down by month. You should reevaluate your budget, at the very least, every month to make sure you’re on track or if you need to make some adjustments. A business bringing in $30,000 a month can just as easily be in jeopardy from mismanaged funds as one bringing in $5,000. It’s all about your budget and diligence to follow it.
Figuring out expenses
Overhead vs. fluctuating
Setting aside money for taxes
Apps to use
Receipts by Wave. If you choose Wave as your accounting program, their Receipts by Wave app will help you stay on top of your receipts, so that they don’t end up crumpled in the bottom of your purse (or does that only happen to me?) Simply snap a photo with your iPhone and send the receipt to your Wave account. It will be automatically turned into an accounting transaction.
MileIQ. Oh, how I wish I had had this app when I worked in the corporate world (I drove a lot of miles). It automatically captures every mile you drive and you swipe to indicate if the mileage was personal or business.
Expensify. Expensify also lets you scan receipts with your phone and track mileage. Additionally, you can log billable hours. And it integrates with both QuickBooks and Xero.