Foundations of Operations Pt. 3 - Budgets and Finance
Pt. 3 in my series on the Foundations of Starting a Small Business
Ugh. Budgets and finance. Boring, right?
Money is such a weird, taboo topic in our culture, and unfortunately this translates into lots of bad habits that can be dangerous for new businesses and organizations.
I can’t tell you how many new business owners I have encounter who just think “We’ll take care of it later” and then later became a year later and they have to spend a fortune getting their books in order for tax time. Or worse, they are late paying taxes and have to deal with penalties and the cost of catching up!
Here’s the secret to all your finance and budget worries: It’s not that bad and it’s not that hard.
There are really two things you need to do when you start your business or organization to get started the right way.
Track your money - We’re are so lucky that it’s 2019! There are a MILLION different cloud based software solutions that make it super duper easy to track your money. GET ONE NOW. Seriously, do it. The most popular option is QuickBooks, but other software companies such as Xero is sneaking up and really making an impact on that market. In any event, pick some bookkeeping software that will work for you. Most of these programs automatically will link to your business bank account and regularly upload your transactions. QuickBooks will even recognize transactions and properly code them for you! To start out, getting this piece in place will save you so much headache down the road! Note: this is a great starting point that many people skip over. Getting tracking in place is key but don’t let this go for too long before you dive into your chart of accounts and coding!
Make a budget - I cannot stress enough how vital it is to make a budget, even if it’s super basic and super simple. Sit down and do a rough outline of all the money you have coming in (or anticipate coming in) and give that money a job. A basic excel spreadsheet will work just fine here to start. Assign every dollar of your income to a task. Paying for staff, paying for travel, paying rent….budget every dollar. This is going to help you in two very vital ways: a) you’ll have knowledge of your needs and b) you can integrate this into your bookkeeping and see cash flow. QuickBooks Online has a great budgeting tool that allows you to run various reports that will compare your budget numbers to your actual numbers.
Get ahead of the game, and don’t skip these steps. Set up software to track your money, and create an organizational budget. These two steps will save you thousand of dollars down the road, they will help keep you compliant with State and Federal regulations, they will help you with your taxes, and they will help you grow.