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When you start a new business, there’s nothing more exciting then seeing those first bits of revenue appear in your bank account. But if you’re hoping to keep your business going for the long run, it’s important to make sure that you’ve got solid financial practices in place to handle those new profits right.
Fortunately, establishing clear financial practices in your business is not as hard as you may think. Here are four practical “build-upon-each-other practices” for getting your finances set up right:
1. Get yo’ self a business bank account
First things first: it all starts with the money—or most accurately, where the money is deposited post-booking. If you’re still using your personal bank account for all your business activities, I’d recommend you drive to your nearest bank and open up a business checking account immediately. Not only does using a single account make it harder to keep track of business-related income and expenses, but it can also translate into unnecessary hours (and potentially dollars) of bookkeeping and tax-related transactions come tax time. Plus, it’ll make the next few steps a total nightmare!
2. Recordkeeping is your business’s bloodline
It’s true! At the end of the day, it’s only a business and not a hobby if you’ve got sales to show. And want to know where those “sales” or better yet, records, live? In your recordkeeping system. That’s why having a bookkeeping system in place is essential. I love how most (if not all) of the recordkeeping systems out there have made it super simple to just link a bank account to them and watch all the transactions be magically imported. This gives us back countless hours of manual inputting and most importantly, cuts back on so many human errors and missed transactions. (Syncing your records like this is another reason why separating your business and personal bank accounts is so important!)
Pro recs: Here are a couple of recordkeeping/bookkeeping systems I’d recommend:
- Wave (the best free option for beginners)
- Quickbooks (my favorite—it’s super user-friendly and has options to fit every business level/stage)
3. Bring it all full circle with a CRM system
I’m all about cutting down on cost and automating. Automation is freedom, baby! Setting up a CRM system that automates and integrates with your recordkeeping software (which is already integrated with your business bank account) helps keep everything streamlined. See, the moment your CRM system, your recordkeeping system, and your business bank account begin to talk to each other, you do away with countless potential human errors and hours spent manually inputting data.
Using a CRM system like Honeybook (pro rec: my absolute favorite!), you can easily convert a potential client into a booked client by sending a proposal using proposal software, online invoices, and a payment using an online payment software. After that, your payment will come straight into your business account, letting your Honeybook invoice know it’s been paid and integrating seamlessly with Quickbooks to keep your financials in sync. That means your financial reports in Quickbooks will align perfectly with your bank account and CRM pipeline. See how everything is streamlined and automated?
4. Cash flow budgeting will save your life (and business)
You may think you’re all set, but if you want to make sure you can continue growing a profitable business sustainably (meaning that you’re prepared for unpredictable ups and downs and inevitable slow seasons), you need a business budget to track your revenue, expenses, and financial goals. After setting up all your financial systems above, you will now be able to clearly see what all your revenue and expenses are. Knowing that, you can then predict what your month will look like, explore what expenses you could cut back on, think about how many more clients/ packages you could pursue, and start to set realistic financial goals and make strategic decisions that are backed up by numbers rather than emotions.
This year (and every other year after that), don’t act like an employee in your business—be the BOSS! What’s the difference? The boss knows exactly where his or her business stands financially, sets and achieves financial goals, and makes strategic decisions that are always well thought-out and financially sound.