If you're juggling the demands of your growing online business, you might wonder how to keep your finances in check. We all have things in our business that we enjoy and that come naturally to us, and then those things that are necessary but we don’t enjoy them that much or just aren’t good at them.

But your finances are your roadmap to success. So, even though they’re usually not super exciting for business owners to tackle, having a good handle on your numbers is incredibly important.

Today, let’s talk about your finances and how to make managing them a bit more palatable.

1. Understanding Bookkeeping: Your Financial Foundation

Doing your bookkeeping regularly is the first step to business growth. Bookkeeping is the process of recording all financial transactions in your business. It's the backbone that supports informed decisions, financial health, and, ultimately, your business's growth.

The key to managing your bookkeeping effectively is to set time aside to do your bookkeeping. Nothing is more intimidating than letting your bookkeeping pile up and having to set an entire weekend aside to catch up. Getting behind also impacts being able to make good decisions on a timely basis. Block time on your calendar daily or, at the very least, weekly to record your transactions. It’s much easier to approach recording a few transactions than having weeks’ worth of transactions to record.

2. Setting Up Your System: Streamline your Process

Whether you've decided a spreadsheet is adequate to track financial transactions or you use software, choosing a method to record transactions is important.

If you’re using a spreadsheet, be sure you’re tracking how much your business is making and spending so you can understand what’s working and what isn’t. Using a system like my Daily 10 Bookkeeping Method will help you see where your business stands when you’re not quite ready to invest in software.

There are many software choices out there. Keep in mind that there’s usually a learning curve with software. And they range in cost from free (e.g. Wave Accounting) or paid (e.g. QuickBooks Online, Xero) The key? Pick a system that grows with your business and doesn't turn your financial tracking into a dreaded chore.

3. Record Keeping: What Should You Track?

Having accurate records for your business is the foundation of understanding the health of your business. To have an accurate picture, you’ll need to keep track of all transactions happening in your business.

Some examples of things to track include sales you make to customers, routine expenses like software, bank/merchant fees, professional services fees, purchases of inventory, and more. Anything that happens financially in your business should be recorded.

Make sure you have a business bank account to make it easier to track business transactions. And don’t comingle personal expenses. Keep business and personal transactions separate, so you have an accurate picture of how your business is doing. Keep receipts to back up business expenses and you’ll be ready come tax time. Use an app to scan receipt copies if you don’t want to have a mound of paper copies.

4. Reconciliation: Completeness is Key

Reconciliation simply means making sure that the information you’ve recorded in your accounting records is accurate and reflects your actual financial position. In practice, it’s the act of comparing the information in your bank and credit card statements to the transactions you’ve recorded in the accounting records.

Doing this reconciliation every month will help you ensure that the financial information for your business is accurate and up to date. If you use software, the software has a reconciliation function to help you perform this task monthly. If you’re using a spreadsheet, compare your entries to the bank statement to make sure you didn’t miss recording something and that everything is recorded accurately.

5. Understanding Cash Flow: Cash Really IS King

Many business owners focus on revenue and profit and don’t pay as much attention to the actual cash in their business. This is a critical error because many businesses fail because they run out of cash. Cash flow simply means understanding the timing and flow of cash in your business.

So, how do you monitor cash flow? Review your statement of cash flows regularly to see the actual cash you have in your business. Cash flow forecasts are also helpful to understand when there could be down times that impact cash. Understanding how cash flows in and out of your business will help you better plan for lean times.

Some things that can negatively impact your cash flow: Not having an emergency fund, late customer payments, inadequate inventory management, inadequate debt management, not keeping bookkeeping up to date, and lack of a viable pricing strategy. Review these areas of your business to see if any of these processes need to be tightened up.

6. Financial Statements: Your Business's Report Card

The three important financial statements to review are the balance sheet, profit & loss, and cash flow statement. Reviewing these statements at minimum monthly provides a snapshot of your financial health and are invaluable tools for making strategic business decisions.

Balance Sheet: This statement reports what your company owns (assets), what it owes (liabilities), and the owner’s stake in the business (equity). This statement shows a company's ability to pay for its near-term operating needs, meet future debt obligations, and make distributions to owners.

Profit & Loss (also referred to as the Income Statement): This statement shows how much income is coming into your business and the expenses your business incurred in a given period. The result is the net income in your business, which is your revenue minus the expenses your business paid out. This statement will help you see where your company is making money and where it’s losing money so you can make adjustments to meet your goals.

Cash Flow Statement: As discussed previously, this statement provides a detailed look at what happened to your company’s cash during a given period. It’s important because it shows your company’s ability to continue operating in the short and long term based on how much cash is flowing into and out of the business.

In Conclusion:

Successful financial management requires setting aside time to regularly review your books and financial statements. Financial management is more than just preparing for your taxes. It’s crucial to your growth and success. Set aside time weekly for the financial tasks in your business. Reviewing financial information gives you the opportunity to spot trends, manage cash flow, and plan for the future.

While DIY bookkeeping is possible, seeking professional help will allow you to grow a sustainable business faster. An expert can cut the time it takes to develop strategies and make changes that will get you to your goals quicker. If you’re looking for guidance so you can grow your business faster, schedule a free discovery call to see if we’re a good fit to work together.

Six Crucial Steps to A Successful Business