Are you struggling with your bookkeeping and trying to build healthier financial habits into your business to stay on track? With all that money stuff to do for your business, it can sometimes feel like there’s just way too much to keep up with.
The good news is that you don’t have to do EVERYTHING at once. Instead, focus on a few core habits that will keep your money organized and up to date. I’m sharing 6 habits you can start NOW to keep your business finances on track. No more frantic catch-up. No more wondering how in the hell you’re going to get it all done.
Watch the video below to get the whole shabang or check out the recap under the video.
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While this is not everything you could do or need to do for your business finances, you would have your finances in pretty good shape if you just did these six things as the bare minimum. Even though there is more you *could* do, I always recommend that you start with these six things as your foundation and as these become autopilot habits, you can begin to layer on the more complicated finance tasks.
Put your receipts in one place (4:16)
This is really about keeping up with the financial paperwork side of your business. The reason that this habit is so important is that financial paper clutter can have a really big effect on our personal sense of financial organization. Here’s an example.
Have you ever sat down at your computer to start working and see a couple of receipts on your desk? Before you know it, you’re thinking about the ones tucked in your planner or maybe there’s a few more under your mouse pad. Let’s not even think about the ones on your bulletin board or the 20 more receipts in your wallet that you haven’t taken out in two months. That starts to make us feel scattered about our money and unorganized.
This clutter makes us feel like our worst fears about ourselves and money are true which is that we can’t stay organized or on track. Those little pieces of paper that are floating around everywhere bring up all these thoughts and fears so a good way to overcome that is to create a system of organization to help you feel less overwhelmed about your business finances.
There are two parts to this receipt de-clutter and organization habit. There are physical receipts and digital receipts. With physical receipts, you basically just want to put them in one place. When you get new physical receipts get used to putting them in the same place every time.
I personally like to use an envelope in my desk drawer labeled “Receipts” with the current year. I also have a specific place in my wallet that I put my business receipts every single time I get one. It doesn’t go in my pocket. It doesn’t go in on the bottom of my purse. It doesn’t go in another place in my wallet. I just slip it into the same place, every time. Then, when I get home, I transfer those receipts into my envelope and I process them.
It’s pretty easy to implement. Once you get used to simply putting something in an envelope every time you get it, you’ll find that you can master this habit quickly. It’s even easier with your digital receipts. Just create a folder in your inbox that’s labeled “Receipts” with the current year and every time you get a digital receipt, drag and drop that receipt into that inbox folder you created.
Work on your finances weekly at the same time on the same day (8:48)
This is about creating a recurring schedule for yourself and your business finances. The reason you’re creating a routine with your business finances is that routines are what keep us going when we’re unsure where to start. Setting up this hot date with your finances will help you to ensure that your finances don’t start slipping through the cracks when things get busy or chaotic in your business.
Pick a date and time to do your finances so that your body knows it’s time for bookkeeping at that same time each week. Don’t just pick a random day. Don’t pick the day that you’re most burnout. Don’t pick the day that you have to do six hours of nonstop client work and client meetings because you’ll be too tired that day.
Pick a day where you have a good energy level and then pick the time of day that you function best in your autopilot work mode.
If you’re a morning person, pick a morning time. If afternoons are your get up, pick an afternoon time. If you’re a nighthawk, choose an evening time so that you bring your best self to do the financial work that may be hard for you. You’re going to be much more successful, much more grounded, and much less flustered than if you decide to do your business finances at 5 p.m. on Friday when you’ll just want to go hang out with your friends.
I want to give you a little bonus tip that has really helped me make sure that I stay on top of my recurring schedule. Put a link to whatever accounting software program that you’re using in the bookmarks bar of your browser. This will help to relieve you of the “log-in exhaustion” you’d feel from having to hunt down your username and password.
Record and categorize your transactions weekly (13:37)
Now that you have a recurring appointment for your money, you’ll need to master this foundational habit! This is the foundation of all financial record keeping which is why I count this habit as one of the bare minimum tasks you need to do for your business finances.
When I say record and categorize your transactions, I’m talking about the actual bookkeeping part of your finances. To be totally honest, if you did nothing else throughout the year and you just recorded your transactions and assigned categories once a week, by the end of the year you would still be pretty darn organized with your finances. So, let’s talk about this as an actual habit.
If you’re using an accounting software program this is actually a little easier for you because those programs sync with your bank account and download your transactions for you with the click of a button. At that point, you’re only job is to assign a category to each transaction.
If you’re using something like a spreadsheet for your business finances, this is actually going to be a little more time consuming because you have to manually go into your spreadsheet and type in those transactions one-by-one. Then you’ll do the categorization.
Enter cash and split expenses weekly (18:04)
This is about keeping up with those expenses that you don’t see on your bank account.
Let’s talk about the difference between cash expenses and split expenses. Cash expenses are expenses that you pay for in cash. These are expenses that you account for if you have a business meeting or take someone out for lunch or coffee, for example. It’s something you’ve paid for in cash so it’s not going to be recorded through your bank which means it’s not going to be automatically downloaded into your digital accounting program.
A split expense is an expense that is split between the personal you and your business. A great example of splitting expenses is going to be your cell phone bill. If you are writing off a percentage of your cell phone bill, that’s a split expense.
Usually, split expenses come out of our personal finances and then you’re doing some sort of record keeping to track it. Other examples of split expenses are things that relate to the home office deduction. If you have a home office, a percentage of things like your rent, utilities, or renter’s insurance are considered split expenses.
You want to stay on top of these weekly because split expenses and cash expenses are the number one expenses that fall through the cracks. Even if you’re using a digital accounting program you still have to do the manual recording of these because these are the deductions you don’t want to miss. Your deductions directly impact how much you pay in taxes which is why you’ll want to do this weekly.
The easiest way to keep up with your cash and your split expenses is by just throwing them all into a spreadsheet and keeping a log of these expenses in one place. You could have a tab for cash and a tab for your split expenses. If spreadsheets scare you, simply put these items in a Google or Word doc.
All you’ll you need to know is the date of the expense, who you paid, the amount you paid, and the expense category it belongs to.
Review overdue invoices and review expenses (23:00)
With this habit, you’ll review overdue invoices on a weekly basis and send reminders to clients who are past due for payment. This relates directly to your cash flow which is a super important part of your business finances. Cash flow is the money that comes in and out of your business at certain periods of time and you need to have a handle on the money coming into your business to pay your expenses.
This habit is all about ensuring that you are getting paid because if you’re not getting paid you are going to have problems with your cash flow.
Maybe you got a new client and they’ve signed a $3000 contract with you. BUT until that invoice gets paid, that isn’t real money in your account. This is hypothetical money until that actual cash is deposited into your account. By checking for overdue invoices and sending reminders on a weekly basis, you’re ensuring that you’ve caught past due payments and you’ve taken action to get paid.
If you use a digital invoicing system, it automatically creates a list of invoices that are open, overdue, and also ones that have been paid. This process is pretty easy. Most times your overdue invoices will be in a different color so you can easily see what’s overdue. Once you know which invoices are due, you’ll send your email reminders out your client.
If you are not using a digital invoicing system, then the process will again be slightly different. Anytime you send an invoice you need to be absolutely sure that you keep a log of all the invoices that you’ve sent out with their due dates. As invoices get paid, notate that in the log. Once a week, look at that log to see if the invoices are paid. If it’s unpaid, send out your reminders.
Review your numbers once a month (29:49)
This is going to be a monthly habit. This is actually about reviewing what’s going on with your business finances and really knowing what’s happening.
The reason you want to do this is that you want to have full transparency between you and your finances. The less transparent you are with your money, the harder your relationship is going to be. It’s just like a relationship with a person. The more transparency you have with one another, the more you trust that person.
With this habit, you’ll run or make what’s called a Profit and Loss report. Sometimes it’s called an income statement in different bookkeeping programs but it’s the same thing. This statement shows you what you’ve made, what you’ve spent, and what’s left over which is called your net income.
What you’re going to do is figure out if you made a profit that month which means you made more than you spent or if you took a loss which means you spent more than you earned.
Knowing these numbers each month will give you a great sense of security. The security comes from knowing what happened that month and not having to worry about a worst-case scenario because you actually have the facts in front of you.
The Cheat Sheet
If you want more habits than these, I have a cheat sheet called the Healthy Financial Habits Cheat Sheet. It has a list of all the things that you could do for your business finances. I recommend that you read through the cheat sheet and have a highlighter with you.
Every time you find a task or a habit that you think pertains to your business, highlight it. Eventually what you’ll do is take your highlighted habits and transpose what you’ve highlighted to your own mastered list and put them on your daily, weekly, and monthly bookkeeping schedule.