5 Easy Tips to Organize Your Business FinancesWritten by InvoiceBerry Team on January 30, 2023
Do you feel like your business is running out of control? Is it hard to stay on top of your business’ finances? Do you find yourself forgetting to pay bills that are due, or balancing the books in your head?
You’re not alone. Many small business owners feel this way. It’s important to organize your finances, both for you and for your employees. We’ll share five easy tips on how to organize your business finances.
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Why Organize Your Finances
There are a lot of benefits to organizing your business’s finances:
You’ll know how much money is coming in and going out. This will help you make better and even faster decisions.
Your financial records will be more thorough if they’re organized. This means it will be easier to file taxes at the end of the year. Save your time for something else!
We don’t want it to happen, but sometimes, something goes wrong with one part of your company’s finances (like an employee stealing money). If your finances are organized, it will be easier to see what the problem is, and take appropriate measures.
Organizing your finances can give you a deeper understanding of where the money comes from (and goes).
It will be easier to find opportunities to save more money if you see how your money moves through your business. Reinvest that money into something that grows your business.
Organized business finances are key for small businesses because they need to be aware of the state of their business at all times.
Getting your business finances organized doesn’t have to be rocket science. There’s some groundwork that needs to be done. But it will pay off handsomely in the future, as well as save you valuable time and money in the long run.
Separate Business and Personal Finances
If you’ve separated your business and personal finances from each other, congratulations! You’re well on your way to getting your business finances in order.
But if you haven’t, don’t fret. Many small businesses start off so organically, that many owners don’t immediately start separating their business expenses from personal expenses.
But setting up a separate checking and savings account for your business (as well as debit or credit cards) will help you stay on top of how your business is doing. You won’t have to dig through your personal accounts to find important business transactions.
Also, consider protecting your personal finances by forming an LLC or similar so your business liabilities won’t spill over to your personal assets.
Organize Your Documents
Over the course of your business, you’ll have a lot of documents to go through. You’ll end up accumulating all sorts of paperwork. Before you drown in them, you should start organizing them. This will help you be more productive in the future: they’ll be out of your way when you don’t need them, but easy to find when you do.
You may find you’ll need to keep the following documents to refer to in the future:
- Accounting and bookkeeping records
- Bank statements and records
- Contracts your business has entered into
- Permits and licenses your business use
- Standard forms that you use for your business such as purchase orders, invoices, receipts, and the like
- Employee and customer records
- Vendors and supplier records
- Tax documents
There may be more. Consider your documentation needs when setting up your filing system. For older documents, consider digitizing them and recycling the paper to keep your office space lean. Match your digital filing folders to your actual folders so there’s no confusion about where to find your older documents.
Track Your Finances\
It goes without saying: you should be tracking where your business’s money goes. You should consider investing in finance or accounting software as early as possible in your business. This will help you stay on top of your finances right from the start.
Whether you track your finances in a logbook, spreadsheet, or software, organize it in a way that’s easy for you to follow. Label all of your transactions so there are no questions about what the numbers mean. This will help organize and simplify your finances, which is important if you need to make quick decisions on financial matters.
Set Aside Money for Taxes and Expansions
If you’re not setting aside money for your taxes throughout the year, you’re going to be in a rough spot come tax time. The last thing you need is for the IRS or state government to knock on your door demanding money that you don’t have. Work out an estimate of how much you’ll need to pay based on your sales, and put it aside, ready for tax season.
It’s also important to set aside some of your profits every year for business expansions, whether it’s buying new equipment, hiring more employees, or opening up a second store. Take a look at your business plan and set aside a budget for them. Seeing those budgets fill up in time for when you’re ready to expand will also fill you with motivation to grow your business.
Set Aside Regular Time for Your Finances
Your finances need quality time with you, too! Every week, consider setting aside 15-20 minutes to go over the movements of the previous week. Check that all money coming in has been accounted for and that your expenditures are all tracked.
There are many advantages to doing this on a weekly basis:
- You won’t have a mountain of paperwork and lost receipts to address over time since they’re dealt with every week.
- Catching errors and discrepancies earlier will prevent it from getting out of control.
- You’ll have an updated overview of how your business is doing every week, which will help you make decisions about your business.
- Quickly identify trends and patterns coming out in your finances, so you can take action immediately before it becomes a problem.
Organizing your business finances can feel like a daunting task. It doesn’t have to be, though! Starting early and going at it one step at a time is key to getting things in order. Make sure you’re in black, not red.
If you follow the tips outlined in this article, before long your finances will not only look better but also help make running your small business so much easier!