Let’s take a sec to talk about money overwhelm in your business. Because the struggle is real.
Money overwhelm comes from having a lot of moving parts and no idea how they are supposed to move together. Instead of being a unicorn prancing to funky town, your financial backend looks like a lopsided spider- with one working leg, dragging itself to the dive bar down the street.
The result? You’re so submerged in the “What am I supposed to do now?” that your finances get nowhere- and so does your business.
Having strong financial systems in your biz conquers money overwhelm and prepares you to be a bad ass babe when it comes to your money. Each of these systems works together and as your business grows, they propel you forward.
Here are the five key financial systems you need in your business to crush the money overwhelm:
Weekly Financial Task List
What is it: A weekly task is more than just a bunch of bookkeeping to-dos- it is a curated list of tasks that YOUR business needs to have completed so your money doesn’t spiral out of control. While there will be bookkeeping tasks on the list, it also includes tasks that impact your cash flow.
For example, if you’re an invoice based business, checking for overdue invoices and sending reminders is an important weekly to-do.
Got a product based business? Then checking that your product sales are properly recorded and that you’ve transferred your sales tax collected to a savings account will be on your list.
Why you need it: Do you ever sit down in front of the computer to do some work and then just stare at the screen, unsure where to start? That’s why you need a weekly financial task list.
When you set aside time for your finances you want to use that time efficiently. Who wants to spend all day dealing with their money? A weekly task list helps you make the most of your financial time AND keeps you on track. No more feeling like everything is going to fall apart any second.
How to get started: Start by making a list of everything you are already doing for your finances. Give yourself a week to make the list and keep it handy. Anytime something pops into your head (or you randomly do something), write it down.
Also, add tasks that you WANT to be doing for your money, but haven’t gotten around to yet.
At the end of the week, sort the tasks into categories like Bookkeeping, Invoicing, Inventory, Analytics, and make a checklist. Use this checklist to batch process your financial tasks once a week.A weekly task list helps you make the most of your financial time AND keeps you on track. Click To Tweet
What is it: A financial recordkeeping system is how you keep track of your income and expenses. There are many forms of recordkeeping systems. The most basic is a paper tracking sheet, or ledger, where you write down all your income and expenses.
Next, we have spreadsheets, which offer a bit more functionality because you can auto sum your income and expenses, eliminating long calculations at the end of the year.
Why you need it: Many people use recordkeeping systems just for tax time and to keep their data organized. But recordkeeping can be so much more!
Especially with the more robust systems, you can pull data about your business and use it to make decisions. For example, if you want to introduce a new product, being able to quickly compare your income by product (and see which is the best seller) helps you decide what type of product to launch next.
Or perhaps you are a service provider and offer multiple packages. Understanding what percentage of your income each package makes up can help you decide how you focus your marketing budget.
How to get started: Personally, I’m a fan of digital accounting programs because they give you the most flexibility when it comes to pulling your data and the process is more streamlined. While the learning curve may be higher at the first, you’re less likely to miss deductions and it will be a time saver down the road.
How do you pick which program to use? First, make a list of everything your business needs a program to do right now. This will be basic things like tracking income and expenses and perhaps invoicing.
Then, imagine your business 1 year from now. What do you need your bookkeeping program to do? How about 3 years from now?
Try to find a program that offers all of your 1-year from now features and some of the 3-years from now features. This way, your system will grow and evolve with your business.
Monthly Business Budget
What is it: A monthly business budget is a cash management tool that helps you keep your real-time spending in check and plan for bigger expenses throughout the year. Think of it like a spending map (instead of spending jail) that HELPS YOU reach your goals- rather than limiting you.
Why you need it: Budgets are the key to sustainably managing your cash flow. If you’ve ever felt like you were bleeeeeeeeeding money, then a budget is for you.
Often, when we start our business there are a lot of expenses before we can start making money. That’s okay- start-up expenses are real!
Where a budget comes in handy is that it sets boundaries around these expenses. Instead of buying every new piece of software that comes your way (and racking up the debt), you make clear, intentional decisions about what you buy and when.
How to get started: The first step in making a business budget is to use your actual numbers and adjust from there. Start with your fixed expenses (also known as a recurring expense) and list each item out on your budget.
Move on to your variable expenses (costs that vary month to month) and take an average of 3 months of expenses. Put these expenses into broad categories like Software, Website, Office Supplies, etc.
Finally, add up all your annual expenses and divide them by 12. This is how much you need to account for in your budget for your annual expenses.Budgets are the key to sustainably managing your cash flow.Click To Tweet
Savings Plan (that includes Taxes!)
What it is: A savings plan is a monthly breakdown of how much you’re going to save. This plan is based on your long-term goals, both for yourself and your business.
A savings plan absolutely must include your quarterly taxes. Too often small business owners blow off their taxes because they don’t know what to save (or how). A savings plan can also include savings for:
Vacation and sick pay
Investments in products or services in your biz
Business emergency fund
Why you need it: Saving for taxes should be at the top of every small business owner’s financial priority list. The whole point of paying your quarterly taxes is that you stay ahead of your taxes, instead of falling behind.
By being AHEAD of your taxes, you decrease your chances of tax debt and the need to get on a payment plan. Payment plans can interrupt your cash flow and you spend more money paying off the past, rather than planning for the future.
One of the hardest parts of saving for the future is prioritizing it! Often we are so focused on spending to grow our business, that we leave out the long term. When you have a plan, with a set amount to save every month, you instantly prioritize your savings.
How to get started: Figure out how much you need to save for taxes by looking at your net income (what your business earns AFTER expenses). A good baseline is to save 30% of your net income for taxes. After you file your taxes for the first time, ask your tax preparer what percentage of your net income you should save and use that number.
Every month run a Profit & Loss report and save 30% (or your tax savings number) of your net income. Make it a point to transfer this money into a special tax savings account and don’t touch it. This isn’t your money! You’re just keeping it safe for the IRS.
For other savings goals, determine how much you want to save annually for your long term goals and divide this number by 12. Then set up a recurring transfer and automatically save this amount every month.
Owner Pay Schedule
What is it: An owner pay schedule is a set amount that you pay yourself as an owner on a regular basis. It is akin giving yourself a paycheck.
An owner pay schedule is based on a holistic view of your finances. It isn’t just a number that you pull out of thin air whenever you feel like it- it is a number that has been crafted with intention and is sustainable for you and your business.
Why you need it: And owner pay schedule forces your business to put you into the mix. How often have you focused so much on spending to grow your business that you’ve forgotten to leave money for yourself at the end of the month?
An owner pay schedule ensures that there’s always money left over for you. It works together with your business budget, tax savings, and long-term savings to create a balanced system where you get paid every month.
How to get started: A successful owner pay schedule requires that you know your gross income, have a budget, have accounted for your taxes, and your long-term savings. If you haven’t created these systems yet, do so first.
Next, look at your personal spending. How much do you need to live? What portion of this does your business need to provide? This is your bottom line.
Now, it’s time to adjust the numbers so that your business can pay you. Remember, you started your business so you could make money- not so you could get swallowed into a money pit. Even if it means not buying something right now, prioritize yourself first and THEN your spending.