I’m always surprised at how many small business owners don’t track their finances. Sure, it can be a little daunting to figure out how much money is coming in and going out of your business each month—especially if you’re self-employed or have multiple streams of income. But it’s also easy to set up systems that will help you keep track of your small business finances every week. The best part? It doesn’t take a lot of time (and isn’t nearly as scary as you might think). In this guide, we’ll walk through the simple steps for creating a space where you can keep tabs on your small business finances every week:
It’s not as daunting as you think to check in on your small business finances.
Checking in on your small business finances is not as daunting as you think. You can do it in a few minutes, and you’ll be surprised at how much you can learn about your business just by checking in on your finances once a week.
Let’s start with the basics: tracking income and expenses. This is where most people start their own personal financial management journey, but it doesn’t have to be difficult or time-consuming if done right from the beginning. If there are no cash registers or credit card terminals involved in running your business (i.e., if it’s mostly digital), then keeping track of daily sales should be fairly straightforward—all you have to do is keep an eye on your bank account balance every couple of days (or even less frequently).
The same goes for tracking expenses; look at what has been spent over the past week and compare that number with what was budgeted for that time period (if possible). In other words: identify any discrepancies between actual expenditures versus planned expenditures before they turn into problems down the line!
Create a space to work on finances
You need a space to work on your finances. Whether you use a spreadsheet or other financial software, such as Freshdesk or Quickbooks, you should create a system that works for you. There are lots of resources online that can help you get started, but here are some general tips:
The most important thing is to have a place where all of your financial information is gathered together in one place so that it’s easy to see how everything fits together at once. If the information is spread out over multiple documents and files, it becomes much harder to track things down when the time comes to do so – which is why having all of these different pieces laid out in front of me allows me to see what’s happening more clearly than looking through each one separately would do alone.
- Create categories for every expense (e.g., office supplies) and income source (such as “online sales” from Etsy). Then use this breakdown as an organizational tool for entering new transactions.
- Keep track of any changes made during the month by updating the totals for each category at the end.
This is a simple way to keep track of your small business finances.
The first step is to create a spreadsheet or use an app. I recommend using Google Sheets because it’s free, and you can share it with your accountant or other people who help with your small business finances.
If you’re not familiar with spreadsheets, the basic idea is that you input data into rows (the labeled boxes) and columns (the larger white spaces). You’ll probably want to create three separate sheets for things like income, expenses, and projections.
You’ll also want to copy and paste the same format each week so that all of your financial information will be in one place. This way, you can easily see how much money was coming in last month versus this month and how many hours were spent on various tasks over time!
Now that you know the difference between revenue and profit let’s figure out how your income comes in. Income is money received from customers for products or services you sell. In order to track it properly, try breaking down income into two categories: revenue and profit. Revenue is simply the amount of money you make by selling your product or service. Profit is what’s left over after taking all expenses into account, including taxes and other costs associated with running a business (more on this later).
Step 1: Define your problem. Before you start on a solution, make sure you know what the problem is. If you’ve read this far, then it’s likely that your finances are less than ideal and could use some attention.
Step 2: Set goals for yourself. The first step toward achieving a goal is to make one! This can be as simple as writing down one thing—I want my business expenses to come in under $5k this month—and then doing everything possible to achieve it (more on this in Step 4).
However, before setting any specific numbers or amounts as a goal for yourself, let’s consider why we’re even here in the first place: we want better financial health for our small businesses! So when setting goals for ourselves financially, let’s keep this bigger picture in mind instead of fixating only on numbers like income or profit margin. For example, if your initial goal was “make more money,” but upon further reflection, realized that making more money isn’t necessarily what will lead to having better financial health (such as increased savings), try rephrasing things like “save half my income” or “pay off credit card debt.”
As long as whatever reason drives us toward reaching these milestones still aligns with our core values and overall purpose behind starting our small businesses (i.e., why do we really want those things?), then any outcome will be beneficial in terms of helping us get there even if our methods differ slightly from other entrepreneurs.
When you know how much money is coming into your business and going out, you can find ways to make more and spend less. This will help you avoid cash flow problems and better understand what your customers are paying for their products.
When calculating cash flow, think about the following:
How much money did we take in last week?
How much did we spend?
What is the difference between these two numbers? If it’s positive (more money came in than went out), then that means there was a cash surplus. If it’s negative (more money went out), then there was a cash deficit.
If there’s a negative cash flow, you need to find ways to both increase your revenues and decrease your expenses. You can do this by analyzing what you spend money on and how much you’re getting back from each expense. For example, if advertising doesn’t work well for you, then cut back on those expenses.
Take note of upcoming deadlines and payments.
You don’t want to miss a thing, so here’s what you should keep in mind:
Tax time. The end of the year can be stressful for small business owners. You may have to pay out bonuses, reimbursements, and more. Or maybe you’ll need to get your books together before filing taxes. Either way, it’s important not to forget about these deadlines!
Payments due soon. Keep track of upcoming payments that are due within a month or two; this way, you can make sure they’re paid on time and avoid late fees or penalties (if there are any).
Deadlines for upcoming events/projects/invoices/etc. It’s easy for small business owners like yourself to get distracted by other things going on around them—don’t let those projects slip away! Make sure you set aside time each week specifically focused on completing tasks related directly to your business finances so that nothing falls through the cracks after all.”
Pay your bills on time.
The first step to effectively paying your bills is to pay them on time. This doesn’t mean you should wait until the last minute to do it, but rather that you should pay them before they’re due, which gives you a little extra time for any glitches that may arise. You can avoid late fees by paying your bills on time, but there are other benefits as well:
Paying in full means that you aren’t carrying debt from month to month. If this becomes a habit, it can help keep down the interest payments and eventually save you money (but more of an issue if it’s an expensive loan).
Paying the right amount reduces the need for negotiation with creditors or landlords—a huge benefit because negotiations often make things worse!
You can also use the money you save by paying on time to pay down your debt, which will help reduce overall interest payments. This is a great way to get started on saving for emergencies (like an unexpected car repair).
One of the simplest things you can do to track your finances is to pay yourself.
This means setting aside some money from each month of revenue for yourself, even if it’s just a small amount.
You don’t have to wait until you have enough profit for your business before paying yourself. In fact, it would be inadvisable to wait until then because taxes will take a big chunk out of those profits before they make their way into your bank account. So go ahead and set aside some funds from each month’s revenue as soon as possible (if not sooner).
This will help you avoid being caught off guard when tax time rolls around. You can also use these funds to cover your business expenses, which is a great way to keep them organized and separate from your personal ones.
Another thing you can do to keep your finances in order is set up an account with a financial institution. This will allow you to receive direct deposits from the clients who pay you. This is especially helpful if they are paying by credit card (or another type of payment that doesn’t require a check). You can also use this account as your business bank account, so it’s important to make sure that your personal funds aren’t mixed in with theirs.
PROFIT AND LOSS REPORT
A profit and loss report is a summary of your business’s financial position. It tells you how much money your business has made or lost over a certain period, like a week or month.
You can use this report to see if you are making money or losing money. If you see that your sales are going down, then it might be time for some cutbacks!
In addition to helping determine whether or not your business is thriving financially, profit & loss reports can also help guide decisions about what types of expenses should be cut back on. For example, if advertising costs are too high, those funds might be shifted elsewhere (like improving customer service).
Profit & loss reports can also be used to help determine the profitability of your products or services. If you’re selling products for $10 each but only earning $2 in profit on each sale, then it might be time to consider raising prices! In addition to helping determine whether or not your business is thriving financially, profit & loss reports can also help guide decisions about what types of expenses should be cut back on. For example, if advertising costs are too high then perhaps those funds should be shifted elsewhere (like improving customer service).
Profit & loss reports can also be used to help determine the profitability of your products or services. If you’re selling products for $10 each but only earning $2 in profit on each sale, then it might be time to consider raising prices! In addition to helping determine whether or not your business is thriving financially, profit & loss reports can also help guide decisions about what types of expenses should be cut back on.
That’s it! Finances are a big part of running your small business, and it’s vital to keep an eye on them at all times. If you want to learn more about managing your money in the long run, please call or email us at [email protected]. We’d love to help answer any questions you may have!