Don’t lose your dream by ignoring your books
When we, as entrepreneurs, start a business, we aren't usually thinking about the mechanics of running it. We usually go into business because we see a need and want to help others
In my business, I’ve started thinking of September as the start of the new year because school is starting again, most vacations are over, and people are ready to get back to business for the fourth quarter.
No matter what kind of business you operate, you need to keep track of your bookkeeping. It isn’t enough to simply not co-mingle your personal and business funds (which you should never do!). I tell people that whether or not their business thrives or dives depends largely on how much they pay attention to proper bookkeeping.
Unfortunately, unless you’re an accountant like me, tracking your business finances often feels a bit like stepping on the scales at the doctor’s office or being sent to the principal’s office. We worry that the news will be bad and that we will get a lecture. It doesn’t have to be that way, though!
If you keep putting your head in the proverbial sand about your finances, it can quickly become disastrous. But if you start keeping track of your finances and look at your numbers, you may find out that the situation is better than you thought, or, at the very least, you will have the opportunity to make things right and improve your overall situation. What doesn’t get measured can’t be improved! Ignoring potential problems will just make them grow bigger and more costly.
So, why do most people not want to track their business finances? From what people tell me, it’s either that they don’t feel they have the time or money to invest in the process, including buying and learning new software, or even hiring someone to do their bookkeeping for them.
It might sound easy to tell yourself that you will just check your accounts everyday and remember all your transactions but the majority of people in this world simply don’t have the mindset or ability to remember that much data over a given time period. This “memory method” can especially become problematic throughout the year when estimated taxes are due. I’ve talked with potential clients who hadn’t filed their income taxes or their sales taxes for quite a while and it put them in a world of (expensive) trouble.
So, how should you get started? Here are some of the most popular and recommended software and methods for tracking your business finances.
QuickBooks Online - Gold standard for accounting software and my go-to for the last 10 years. Start with the lowest subscription level (Simple Start) but don't use QuickBooks Self-employed! I do have an affiliate link that might save you a few bucks!
Xero - A good alternative to QuickBooks Online. Works in much the same way.
FreshBooks & Wave - I do not have much experience with these two platforms, and I previously would not have recommended them. However, they have improved and are now recommended by several online accountants.
Excel - if you are tech savvy enough to download transactions from your bank in a .csv file, you can probably make Excel do the math for you to create your Profit & Loss Statement. It wouldn't replace complete accounting software, but it's a start.
Bank statement - highlight and tally - This last method is the I-have-no-other-option alternative method. Print out your bank statement each month and then tally up your deposits. Group your expenses and add those up as well. Keep track of everything so that you can more easily get your taxes done next year.
I know that is a lot of information to absorb at one time! If you have questions or want help getting your books back on track, make an appointment with me!