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As a bit of a spreadsheet nerd, a topic I love to chat about is finances and expenses. How well do you know yours? When I speak to small business owners a lot of you know exactly where every penny in your business is going. Most of you however, don’t.
Now I know finance is a boring topic (to a lot of you anyway). But learning and handling your finances is what is either going to make or break you as a business. If you are slowly losing money every month without noticing, you are going to fail. Maybe you have a great handle on things, but there are a few things slipping past the cracks. Those things could reduce your income by a couple of thousand a year if you don’t catch them.
I would love to walk you through the three most common money mistakes I come across with small business owners.
Ok, so you are a one person business. All profit you make goes to you anyway. Why not just have one account? Great idea! Wrong. Having one account means that your business expenses are getting tied up in your personal expenses. Thus making it harder to track your outgoings every month. Maybe you don’t feel you have enough outgoings for this to matter. But let me tell you, you do.
Having a separate account means that every single transaction within your business account is business related. This means it is also most likely tax deductible. It’s much easier to track your expenses and income and makes tax season 100 times easier for you. Transactions are much more likely to catch your attention if they are in a separate account.
This includes things like Paypal accounts. Keeping all of your business transitions in one place makes them so much easier to manage.
When I say not knowing your expenses, I don’t just mean knowing how much you spent in the previous month. I also mean knowing exactly when payments are taken and subscriptions renew. For example, every year (most likely), your website domain will renew. Can you tell me the exact date this will happen. Or maybe something larger, like your Dubsado will renew. When will this happen. You also have renewals that will happen maybe every few years, for example, I pay my Bluehost subscription in three year payments. While this costs me less in the long run, it also means that every three years a very large sum of money deducts itself from my account. If I’m not prepared for it the payment will bounce and 50+ websites will go offline.
Knowing your expenses also means that you will know exactly where every penny in your business is being spent. This meaning you can cut out unnecessary costs. For example, last time I checked I had 5 stock photography subscriptions on my account, at least two of which I no longer used. By spotting this I reduced my monthly outgoings by $110. It’s amazing what you find when you dig right into everything and categorise it all.
Now for one I used to be really bad at, falling behind on the bookkeeping. Honestly, I used to be a nightmare for this. Spreadsheets, half finished documents, sticky notes, a handbag full of paper… It was embarrassing. This was before I discovered Quickbooks. This little app is honestly amazing! You sign-up, link up your bank accounts and Paypal accounts (I’m sure there are other options as-well, but that’s what I use), and it will automatically track your income and expenses.
You can set things to auto categorise, so for example any time I receive a payment from Etsy, that is automatically send to my “business income” folder, and it add’s up my income. Likewise, if a payment ever comes out of my account for “Facebook”, that is automatically added to the “Marketing Expenses” folder. I can see an extremely clear view of all the transactions that have gone through my accounts, how much I’ve spent, how much I’ve earned, and even how much I’ve paid in fees on what I’ve earned. And they display it in some easy to understand graphs.
There are a few other benefits of Quickbooks that I don’t use too much, but from what I’ve seen they are great. It has a mobile app (I LOVE this!), and if you turn on location settings it will automatically track your millage – great for expensing those trips to client meetings or to pick up supplies! You can also invoice directly through the app. While I personally used Dubsado for invoicing, this would be extremely handy for someone who doesn’t have a huge budget for a CRM system.
Best of all, Quickbooks has a price tag as little as £3 a month, AND it does you taxes for you! (seriously, it does!).
There are so many great ways to keep on top of your bookkeeping and expenses. Laying everything out in-front of you and knowing where your money is going may be daunting, but I guarantee as soon as you begin, you’ll spot a few payments you no longer need to be making. Trust me.