Category Archives: Small Business

Are your “Nikes” on the ground? Or Do Ya Feel a Bit Shaky?


6 Steps to Implementing Financial Systems that Work For You

It’s so interesting and inspiring to work with small businesses. Each owner is so unique, creative, passionate, smart, and interesting and creates a business that brings in all of these wonderful qualities and more.

That’s why I do what I do!
Teach you how to manage your money, your cash flow, and do the very best you can with what you make. I do this because each of you are the very essence and backbone of this economy and we need you!

So let me ask you this. Do you have your accounting systems in place? How much time do you spend managing your money?

I know I get it, it’s hard to keep up with because well you have your business to run, customers to see, prospects to meet, and all the rest which leaves not so much time for the money management thing. And you’re right, any one of us who is in business for ourselves should be spending ¾ of our time generating revenue, myself included. That means there’s not so much time left for the rest.

But if you don’t have your financial systems in place it’s a recipe for disaster and everything you’ve worked so hard to build can crumble quickly. It takes the right systems to be in place and a team of people who can help get those systems in place for you to be on the solid ground necessary to manage your business. Once those systems are in place you’ll be able to spend the time you need to make sense of the financial reports that will help you make proactive decisions about your business. When you are proactive in managing your money your business will be poised for economic downturns as well as for growth and expansion and any other surprises in life.

Here’s “the what and the who” that will get you going:

Get the right systems implemented
The accounting system – There are many to choose from: QuickBooks, SAGE (formerly PeachTree), or another accounting system that you like. The accounting system will track all the money that flows in and out of your business checking and / or savings accounts by vendor and customer. It is important that the structure of this system is implemented to mirror your business with concise revenue streams, cost of sales, and other related expenses. Reports that help you manage your business are generated from your accounting system any time you need them.

Planning & Forecasting – A system that allows you to budget, plan, and forecast so that you know if your business is on track with your goals. By comparing the plan and budget with what is actually going on gives you insight to any changes that you need to make before areas of your business get out of hand. This is the blueprint toward your overall vision.

Get a Binder & Dividers – For bank statements, credit card statements, and monthly financial reports. Because believe it or not you are the CFO of your business, not a position to sneeze at. The CFO is a highly respected position and is the voice of reason. So welcome to it and make some space for it!

Choose a great team – Bookkeeper, Financial Mentor/Coach, CPA

Hint – You most likely know one of each of these from your networking groups.

The Bookkeeper
Ask them questions and have them walk you through what they will do. They need to understand your business as much as you do so they can help you define your financial structure inside the accounting system. A great structure yields great reports that will help you plan and make good business decisions.

A Financial Mentor/Coach
Helps you navigate through the financial system that you’re setting up. This person helps you implement a financial forecast, read the reports from your accounting system, manage cash flow, and will let you know which questions you should be asking a CPA, a bookkeeper, perhaps a Financial Planner, potential funding sources, and how to set up that financial structure in your accounting system.

The mentor/coach will also ensure that you have done two very important things:
• Plan to pay yourself which is important for both your business and personal welfare.
• Spend money in such a way that you actually “invest” in your business. That means money spent actually helps you reach those goals and visions with evidence that clearly supports that.

A good business plan and cash flow management will always incorporate a tax strategy. Building a good relationship with a CPA is priceless. They are a wealth of knowledge when it comes to taxes, tax strategy and other related advice

Other Financial People to Build Relationships with:
Bankers and lenders
Insurance Agents
Financial Planners

When Boundaries Get Fuzzy

dollarsignKeeping Personal & Business Expenses Separate for Clarity

You’re out having lunch with a prospect that you’ll pay for out of your business account. On the way back to your office you stop at the pharmacy to pick up a few things that you need for home. You use your business cash for that as well.
Sound familiar?

This is one of many common and unavoidable scenarios for entrepreneurs and small business owners.
Having a procedure in place that allows you to track for this is helpful in two important areas; taxes and reporting. Here’s why:
1. You avoid many hours of ferreting between them when preparing your taxes
2. Month end and year-end financial reports for your business will reflect accurate results for sales and expenses and therefore your net income and margins so you know exactly how you measure up.

The expenses that are most prone to mixing in with personal expenses are
Travel & Entertainment, including meals & office supplies.

When not properly accounted for, these expenses leak your profits and are also red flags for the IRS, particularly the travel and entertainment expenses. Implementing a simple policy and a tracking procedure for spending in this area will keep these expenses organized and clear so that your month end financial reports are accurately reflected and there’s no rushing to organize the information for taxes.

What to Consider:
1. A Rule of Thumb:
Whether you’re taking clients to lunch, to play a round of golf, or a game of tennis, it’s usually to build a relationship or to maintain a relationship for generating business revenue which can all be claimed as a business expense. That’s easy.
If you have a golf or tennis club membership that is used primarily for clients and prospects but occasionally you take family and friends, this can still be claimed as a business expense.
The reasoning here is that if at least 80% of the membership is used for business either generating revenue or building vendor relationships, then the membership can be claimed as a business expense.

2. Simple Policies That Make a Big Difference
When you agree to meet a client for dinner and pick up the tab but they show up with a significant other and others you didn’t expect who are not relevant to your business, should you or do you pick up the tab? This is one to consider having a policy for. It’s one of those situations that if you let it go once without addressing it, it may continue and get out of hand costing you more than anticipated which is why it’s best to nip this one in the bud early. If you have a policy in place and there’s a plan for entertainment expenses with limits, you will need to articulate your policy expectations to clients and prospects before meeting with them. As your business grows you can update your policies as you see fit.

3. Tracking Personal Expenses Spent With Business Money
Whether you use business cash, debit, or credit cards for personal reasons tracking it will keep you organized and make your life easy.
The best way to handle this is to set up a loan on the business side so you can see month to month what the personal expenses were to the business. Decide how often you will pay back the business. You can do this by either writing a check from your personal account or by taking less of a draw. When you take less of a draw, be sure that your personal expenses are covered. You may start out with doing this one way and then make changes as you grow.

It’s important to keep business and personal expenses separate as much as possible. By acknowledging the rule of thumb and creating a simple policy along with a tracking procedure, you will avoid the headaches and the amount of work it takes to organize this area of your business. Initially there’s a little work and some foresight involved, but worth the effort it requires as you go forward and your business grows.