Hey there! If you’re like most entrepreneurs I talk to then you’ve probably been avoiding your books for a lot of reasons. Maybe it scares you. Maybe you’re unsure of what to do when you check those books out. I get it. It can be a scary place to start when you have no clue what to do or what you’ll find so let’s dive in on how to tackle the books in a way that isn’t scary or overwhelming.
1. Keep the finances separate
I feel like this is a no-brainer but keep your business finances and personal finances separate. “But Amanda, I pay myself from the business, riddle me that.” You should be setting aside 30% for taxes and 20% for business expenses. Feel free to pay yourself the other 50% if you’re a solopreneur. Now the numbers change if you have employees but generally the fresh, solopreneur can start here.
2. Start with a system
You need a system in place. I cannot stress this enough. A lot of entrepreneurs just hand in bank statements but that’s not really helpful. The IRS cannot see what you purchased at Staples if you use a bank statement. Having a handy system will help you track all the expenses and what you actually purchased. This is great way to prevent an audit.
3. Categorize all the things
You need to categorize the purchases and the incoming cash flow. Tracking credit card fees, types of services you sell and more will help you make better financial decisions in your business. You can see what sells, what is eating up your costs and more! This also helps when it comes to deduction time. Did the lunch bill come as a client lunch, personal lunch or an employee lunch? Determining what the money was spent on will help you save big time at tax time.
4. Make it a habit.
Get into the habit of getting personal with your books. The more you know, the more empowered you feel. The more empowered you feel with the finances, the more the business can grow. It’s a win overall. Set aside time weekly or monthly to flesh out the books. I do not recommend doing it quarterly as that’s a ton of work to go through and you’ll overwhelm yourself. Block a day on the calendar and only work on the finances that day. Come tax time, you’ll be thankful you did.
If the idea of managing your books is overwhelming and still a little terrifying, we need to talk. dlux Solutions offers both training and done-for-you services when it comes to your books. You’ll never feel afraid of your books again. Book a consult with us today to discuss how we may be able to help you thrive.