When you’re running your own business, it can be tough to stay on top of your finances. But if you want to keep your business thriving, it’s important to implement some sound financial practices. Here are seven things you should start doing right now.
What is a Business Finance System?
A business finance system is a tool that helps you track, manage, and understand your business finances. It includes all of the financial information for your business, including income and expenses, assets and liabilities, and cash flow. Business finance systems can be either manual or electronic, but most businesses today use some form of electronic accounting software to track their finances. While business finance systems vary in features and complexity, they all provide some essential functions, including bookkeeping, financial reporting, and tax preparation. Business finance systems can be an invaluable tool for small businesses, helping them to understand their financial situation and make informed decisions about their money.
There are many pieces to a successful business and it can be overwhelming for someone new or even an experienced entrepreneur. I’m breaking down what you need in order so that all of your financial needs will have been met with this system!
It’s important to have a system for keeping track of your business finances, especially if you want the best possible outcome. The first essential part is what most people would think about when they consider their books: A tracking or bookkeeping process that records all transactions and keeps them organized in one place so it can be accessed at any time.
You need a way to keep track of your income and expenses in order for your business finances. There are many different types from keeping it simple with paper or spreadsheet, all the way up to an online accounting system that will help manage everything seamlessly.
Paper tracking Sheet
The paper tracking sheet is the most low-tech and low investment option for a tracking system. You can start using this system right away by handwriting your income and expenses. The paper tracking sheet can be a paper ledger or in a binder. This system will help you keep track of your finances and save money.
A spreadsheet is a digital format for storing data. The biggest benefit of using a spreadsheet is that the formulas auto-calculate, so you don’t have to do all the math yourself. This can be a huge time saver, especially at the end of the month when you’re trying to add up a bunch of numbers. Spreadsheets also make it easy to share data with others, as you can simply send them the file. If you’re looking for a way to streamline your data storage and calculation, spreadsheets are definitely worth considering.
Digital Accounting Program
The third system is most of the advanced system and that’s a digital accounting program. And, even though these are more advanced, they save you a lot of time and energy later. The most popular digital accounting programs are QuickBooks Online (which is my go-to and what I use), Xero, and Wave. These systems are the highest time and financial investment but also have the potential for the most automation. Once you have these digital accounting programs set up, if you have recurring revenue coming in (like from coaching clients), you can set up automatic payment reminders that go out to your clients so that you’re not having to manually send them every month. This automation can save you a ton of time in your business.
An effective business finance system is crucial to the success of any invoice-based business. An efficient invoicing system saves you time and aggravation by streamlining the payment process and making it easy for both you and your clients. The key to an effective and efficient invoicing system is to be intentional about its design. By taking the time to create a system that meets your specific business needs, you can save yourself a lot of headaches down the road. And, best of all, an efficient invoicing system will help you get paid on time!
A good invoicing system is one that is clear and concise. Your payment policies should be upfront and easy to understand. There should be no ambiguity around when invoices are due and what the consequences are for late payments. Late fees are a necessary part of doing business and they help to ensure that invoices are paid on time. After the first late fee, people will generally prioritize paying your invoices. A good invoicing system should also allow for multiple methods of payment so that customers can choose the option that is most convenient for them. Overall, a good invoicing system is one that is efficient, easy to use, and effective at getting invoices paid on time.
Another aspect of a good invoicing system is your invoice delivery system. This is HOW you get your invoices from you to your clients. You want your delivery system to be easy for you to manage. This means that you aren’t overwhelmed with hand typing 20 invoices in one day. And then you’re not going to get paid. A good invoicing system will make it easy for you to send invoices without spending a lot of time on it. You should be able to easily duplicate invoices, schedule when they go out, and have them automatically sent through email.
It’s important that your invoicing system is easy to use, both for you and your clients. Easy access and understanding will help reduce the number of questions your clients have about what they’re being charged for. An easy-to-use invoicing system will also make it easier for them to pay you. The goal is to make the entire process as smooth and hassle-free as possible. By streamlining your invoicing system, you can save yourself and your clients a lot of time and frustration.
When it comes to getting paid, the first thing you need to do is think about how your clients or customers will be giving you money. Will it be an invoice that they pay online, an online checkout page, PayPal, or even just writing you a check? There are a lot of different ways that you can get paid, so you want to make sure you choose the best method for your business. Each option has its own advantages and disadvantages, so you need to weigh all of your options before making a decision.
Once you’ve determined your pricing, the next step is to establish payment policies. This includes deciding which payment methods you will accept and set any limits on invoices or payment types. For example, you may only accept three forms of payment or only allow invoices over $1,000 to be paid by check. These payment policies help to define the boundaries of your business finances, both for practical and emotional reasons. By clearly stating your payment policies upfront, you can help avoid any misunderstandings or conflicts down the road. And by setting limits on what you’re willing to accept, you can help protect yourself from financial stress. Establishing clear payment policies is an important part of running a successful business.
A refund policy helps to protect your business from refund requests that you can’t honor, and it also helps to set customer expectations about what is and isn’t refundable. To create a refund policy, start by identifying which refund requests you are willing to honor. Generally, requests for digital products are not refundable, while requests for physical products may be refunded if the product is returned within a certain time frame. Next, establish criteria for refund eligibility. For example, you may require a receipt or proof of purchase. Finally, outline the refund process so customers know what to expect. For example, they may need to contact customer service to initiate a refund request. By having a clear refund policy in place, you can reduce anxiety around refund requests.
Most businesses offer some type of discount to their customers, whether it’s a percentage off their purchase or a free gift with purchase. However, it’s important to have a discount policy in place so that you’re not giving away too much work for free. A discount policy helps you to set boundaries and limits on the amount of discounts you give out each year. This ensures that you’re not reacting impulsively to every discount request and that you’re making decisions based on your business goals. Having a discount policy in place helps to keep your business running smoothly and prevents you from giving away too much work for free.
Starting the year off with a discount budget and discount policy in place can help you to avoid falling back into a pattern of over-giving. When someone asks for a discount, you can refer to your budget and policy to help you make a decision. This benefits both you and your business. discounting items can cut your profits, but it can also lead to resentful customers if they feel like they’re being taken advantage of. Having a set budget and policy in place will help you to strike a balance between giving discounts and maintaining healthy profits.
There are many pieces of paper in a business finance system, and without document management, you could end up with piles on your desk.
When it comes to documents, most people worry about their receipts. Legally, in the U.S., we need to keep receipts for three years. But there are other documents you also need to keep, like bills and invoices from your sub-contractors and tax documents.
When it comes to document management, you have two options: hard copy storage or digital storage. Hard copy storage involves setting up a filing system for your receipts, tax documents, and paper invoices. While this option may be more traditional, it can be difficult to keep track of physical documents. A digital system means that you will scan the documents, file them on your computer or in an app, and then toss the paper. This option is more environmentally friendly and can save you space, but you need to be sure to back up your files in case of a computer crash. Ultimately, the best option for document management depends on your individual needs and preferences.
Cash flow management
Cash flow management is the process of tracking and keeping track of money going in, as well as monitoring how much comes out. This includes having enough cash on hand to pay for expenses should they arise.
Cash flow and profitability are two different measures of success for a business. Cash flow is a measure of the money coming in and out of a business, while profitability is a measure of how much profit a business is making. A business can be highly profitable and have little cash flow, or it can have high cash flow but be less profitable. Cash flow management is about ensuring that there is enough money available to pay for the things that a business needs to operate, such as inventory, staff salaries, and rent.. Cash flow management is therefore a crucial part of running a successful business.
Cash flow management has two parts. The inflow refers to the money coming into the business, which is largely determined by the invoicing system and how quickly customers pay their invoices. The outflow is the money going out of the business, which includes all expenses. It’s important to carefully track both inflow and outflow, as spending too much before money comes in can lead to cash flow problems. By understanding both inflow and outflow, businesses can better manage their cash flow and avoid financial difficulties.
A budget is one of the most important cash management tools available to businesses. It can help you track your income and expenses, and make informed decisions about how to allocate your resources. A budget can also be a useful tool for controlling cash flow. By forecasting your income and expenses, you can identify potential problem areas and take steps to address them before they become a major issue. Creating a realistic budget is an essential part of effective cash management, and can have a dramatic impact on your business’s bottom line.
Another element of cash flow management is when you spend money and why. This is where the emotional stuff comes in. We all have emotional triggers that can lead to overspending, whether it’s keeping up with the Joneses or trying to impress others. It’s important to be aware of your emotional triggers and manage them accordingly. Otherwise, you may find yourself in a difficult financial situation. So ask yourself why you’re spending money before you make a purchase. If the answer is anything other than “because I need it,” then it’s probably an emotional spending decision. Take a step back and consider whether the purchase is really necessary. If not, then save your money and resist the urge to spend.
Taxes are an important part of any business finance system. By saving for taxes and paying your taxes on time, you can help ensure that your business is operating smoothly and efficiently. Additionally, being prepared for the actual filing process can help avoid any stressful surprises come tax season. By keeping tabs on your taxes throughout the year and staying organized, you can help make the tax filing process a breeze.
One of the best ways to save for and pay taxes is to save money every month in real time. This means that every month, you calculate a percentage of your net income to save for taxes and immediately transfer that money to savings. This ensures that you always have the money available when it comes time to make your estimated tax payments every quarter. Additionally, saving in real time can help you avoid last-minute scrambling to come up with the money when tax season rolls around. By taking this proactive approach, you can save yourself a lot of stress and ensure that you’re always prepared come tax time.
As a self-employed person, you are responsible for paying taxes on your income. This is true even if your business is not profitable. While it may be tempting to ignore your taxes throughout the year, this can lead to stress and anxiety come tax season. It is best to set aside money each month to cover your tax liability. This will help you avoid any surprises come April 15th. You should also keep detailed records of your income and expenses. This will make it easier to file your taxes and maximize any deductions or credits you may be eligible for. By taking these steps, you can minimize the hassle of paying taxes as a self-employed individual.
A weekly appointment to review your income and expenses is a great way to stay on top of your finances throughout the year. By setting aside a specific time each week to track your money, you can ensure that you’re always aware of where your money is going. This can help you to make informed decisions about your spending and save money in the long run. Additionally, making a weekly appointment with your finances can help to build the habit of being proactive about your money. Seeing your income and expenses on a regular basis can help you to form a healthy relationship with your money and make better financial decisions overall.
As a business owner, it’s important to have a system in place for how your business gives back to you personally. This is essential for making sure that you’re able to take care of yourself both financially and emotionally. One important element of this system is your owner’s pay schedule. This is how your business pays you money so that you can live. It’s important to have a regular schedule for this so that you can budget and plan accordingly. Additionally, it’s important to make sure that your owner’s pay schedule aligns with your personal values. This will help ensure that you’re able to stay motivated and invested in your business. Ultimately, your owner’s pay schedule is an important tool for self-care as a business owner.
One of the most important aspects of self-care is financial planning for the future. Business owner needs to be sure they are contributing enough to their personal savings so they can make investments in their life, such as buying a home or taking care of their health. They also need to make sure their business is supporting them in paying off any debts so that they are not burdened by these payments in the future. Finally, a business owner needs to think about how their business can help them save for retirement and pay for things like health insurance and sick time. By thinking about these things now, business owners can set themselves up for success in the future.
As a business owner, it’s easy to get so caught up in the day-to-day details of running your company that you forget to take care of yourself. However, self-care is an essential part of being a successful business owner. When you take the time to take care of yourself, it sets a precedent for your business to take care of you as well. Additionally, self-care puts you in the equation. Too often, business owners focus all their attention on their businesses and neglect their own needs. By making self-care a priority, you ensure that you’re always factoring into the equation.
Creating partnerships between all of the different parts of your life will make it easier for you to keep up with everything. When things are working in partnership with each other, they can build off of each other and feed into each other. This creates a system that is intentional and self-sustaining. The most important part is to focus your energy on creating partnerships that will work together to make your life easier. By taking the time to create these partnerships, you will be able to free up your time and energy so you can focus on other parts of your life.