Since the beginning of the year is the perfect time to put new systems into place for businesses, I wanted to address the idea of organizing the finances for the year ahead. If the finances are in order, we sleep better and feel fairly confident when handing over the books to an accountant at tax time.
That said, time and time again, I come across new and even some not so new small business owners getting extremely stressed out due to letting their money paperwork slide. And the worse it gets, the deeper and deeper they sink and the more overwhelming the idea of organizing it all becomes. It’s a vicious cycle, that when only some simple steps are implemented, things become a lot more manageable and the mess goes away! Some of these steps are extremely easy, yet many owners have not taken the time to put in place. The great news is — is that it’s never too late. Check out these 5 easy steps to getting your finances in order, and give your biz the right start in 2014.
- Kinda goes without saying, but if you haven’t already: Create a business bank account completely separate and independent from your personal/family account. Transactions associated with the business account must be solely business related.
- Buy yourself an accordion folder, a binder with pocket folders, a bankers box, or filing cabinet. You must have some type of ‘holder with dividers/folders’ for all of your paperwork. As much as we want to save trees – the gov’t wants us to leave a paper trail. You’ll be glad you keep everything recorded and on file, if for some reason one day the taxman wants to do an audit.
- Create some repositories and label some primary categories for the following:
• Bank Statements and deposit slips if not in a deposit book
• Credit Card Statements and receipts from expenses paid for on credit
• Telephone/Internet bills
• Receipts paid by cheque (if you pay for things by cheque) Note: Remember to write the CHEQUE NUMBER and DATE the cheque was written on the receipt/invoice.
• Cash Receipts (purchases made for with cash)
• Billing Sales Invoices (Keeping these in an accounting program, or even just in a folder on your computer is also fine and do not necessarily have to be printed out. Back up regularly!)*
File only the expenses that pertain TO THE BUSINESS!! Sounds pretty obvious, but this is no place for grocery, drugstore, or dental bills etc.
- Carve out time weekly (on your calendar – same day and time) and call it ‘Money Attention’. At the allotted ‘Money Attention’ day, turn off email notifications, phone and any other external potential distractions. For good time management, set a timer for 20 mins. Input expenses into your accounting software** and file receipts and bills into their respective folders. Do any invoicing to customers that you’ve made note of during the week at this time. If time runs out at 20 mins, break for 5 mins, then give yourself another 20 mins and so on.
- Open your snail mail bills as they come in and put in one pile or in your ‘inbox’ receptacle on a small, yet uncluttered area of your workspace. These bills and receipts are collected during the week and set aside to be dealt with on your ‘Money Attention’ day