Last week, I wrote about creating your own business plan – a document mapping not only your future plans, but the specific ways you plan to get there, who you plan to do it with, and how you plan to finance the journey.
This week, I’m focusing on the next crucial step of the kind of organization that will lead your business to success.
You would think that finances would be one of the first things that we, as female small business owners, attend to. But unfortunately, when I asked my bookkeeper what she viewed to be the biggest mistake female business owners make, she shared without hesitation that she believes it to be not having accurate accounting systems in place.
I set out to see if she was, in fact, right. I asked women at my entrepreneurial groups and meet-up events, in my group of friends and on twitter how they were handling taxes and financial records, and the majority of them told me they weren’t sure.
This, my friends, is absolutely unacceptable.
It’s important to keep financial records for a few reasons, not the least of them being that this is the only way you’re going to be able to accurately file your taxes. You also need them to track your progress on your business plan, project gains and losses and know how to plan ahead. Lastly, if you’re ever looking for investors, they’re going to want to know why they should invest – and your financial records will be a vital part of that process.
Here’s the basics:
1. Whatever you do, keep them.
It is essential you keep accurate financial records for your company. There are different programs, conflicting views on how you should do it. Some bookkeepers say you should keep receipts and some say you shouldn’t. The bottom line is that you absolutely need to know what you spent and what you sold.
2. Keep it simple.
I have a system set up where I download my sales, PayPal records, bank account statements and invoices all from different systems in the same format each month to send to my bookkeeper. Yours will obviously look differently, depending on your individual business, but at Nakate I know its important that we’re tracking sales in each of our distribution channels, and updating purchases and receipts. The easiest method for us, since my bookkeeper is in LA and I’m in NYC, been google docs. My bookkeeper and I share a spreadsheet where I record the date and explanation behind all expenses, and she responds with any need for clarification.
3. Know what to keep where.
You can write off as business expenses, such as your phone, your inventory purchasing, supplies, payments for any services the business needed and about a dozen other things unique to your business that I haven’t thought of yet. That’s money back in your pocket, so be sure to use your company credit or debit cards for these expenses, and keep them separate from your personal account, which it will be harder to write off expenses from.
Similarly, if you’re boostrapping and putting money into your own business, you’ll want to record those transfers from your personal account so future investors or stakeholders will see what you were able to achieve with that money.
4. Track your inventory.
If you’re selling stock of something, you need to track how much of it you have left when taxes come around – as well as how much you’ve sold. To do this you need to have a system of inventory set up that you can use effectively as new inventory comes in and update as it goes out. Mine includes online sales, sales to retailers and sales at trunk shows and events. You can fill in the blank of whatever your businesses specific needs are.
5. Organize your invoices.
I love using Freshbooks for my invoices, because I can enter new clients, invoice and track payments both from clients to the business account and from my accounts to Uganda both online and from my iPhone. Whatever you use, make sure you’ve got a system set up where you can save clients and invoice them repeatedly without getting confused as you take on more and more accounts.
6. Get a bookkeeper if you need to.
If you’re overwhelmed by keeping track of your finances hiring a bookkeeper is an easy way to do it. And, it’s not going to be as expensive or difficult as you think. Mine is another young female entrepreneur working to build her own business as I build mine – I love being able to mutually support and learn from each other! Half the time we end up laughing out loud half way through my quarterly reviews.