As a CEO, aspiring CEO, entrepreneur or any kind of business owner, you may second-guess how you're managing both your personal and business finances.
As a start-up business that financed your dream primarily with your own money, it can be hard to keep track of all personal expenses, business revenue and business expenses.
Below are 5 actionable steps you can take to quickly manage both your personal and business finances quickly and with confidence:
Step 1 - Seperate Accounts
If you haven't already, step number 1 is to open a business bank account. Even if you haven't made a dollar yet in your company, the moment you set your company up you should open a business bank account.
The first reason for this is to avoid any legal trouble. If you were to have any issues, you do not want your personal and business finances mixing.
The second reason for this is to make things a lot easier on you. It will take 10-30 minutes of work to set up your business bank account. But you'll save 15+ minutes every week with money management, because you're keeping everything separate.
Once you do start generating income (not revenue, income) you can start paying yourself wages from your business bank account to your personal checking account. It may make sense to officially pay yourself a salary. Do your own research and consult with your accountant!
Step 2 - Use Budgeting Tools
The thought of a budget may feel intimidating. But, by using budgeting tools from day one, you can take a lot of the guesswork out of your routine money management.
For personal finances, use a budgeting app to track all income, expenses and investments.
Common Apps Include:
USA - Novo Bank or Chase
UK or AUS - Nettle by NatWest or Anna
For business finances, use a simple bookkeeping tool.
As always, do your own research and consult with an accountant to make the best decision in software for you and your specific needs.
Step 3 - Create a Reserve Account for Taxes
Taxes are a common pain-point for all business owners. Instead of paying yourself first and then hoping you have enough for taxes, assume that every dollar you earn will have at least 20% removed for taxes. Your tax rate will depend on a lot of factors so do some research and seek professional consultation.
Every time you get a payment set x% aside into a reserve fund that can't be touched until tax season. Many banks allow a reserve account, which locks in your funds until you manually unlock them. If that isn't an option to you, open a savings account with your business bank and title it "Taxes" or "Reserved".
Step 4 - Know ALL Your Essential Expenses
Do you know the approximate amount you have to spend each month on personal bills? This number shouldn't include elective expenses such as eating out, entertainment or 2AM Instagram Ads purchases.
If you don't, go through 6-12 months of credit and debit card statements and average your expenses out. Physically write each mandatory expense down and make sure to write down the total.
Knowing this number will help you be more mindful of spending and keep you on track for faster money management week to week.
Next, do the same for your business expenses. When business picks up it's easy to miss all the little expenses that crop up. You may even wonder where all the money is going because you know you're operating at a strong profit.
Physically write each recurring business expense down and calculate the total. Don't forget to look for annual payments or big 1 time payments.
Step 5 - Create a Quick Money Management Plan
Finally, make two more lists. One list should be all your personal finance accounts. Banks, credit cards, brokerage accounts, etc. The second should be all your business' financial accounts, including bank accounts, debit cards, credit cards, payment processing accounts and asset accounts.
Schedule in one 15 minute time block each week for money management week. Alternate between personal and business check-ins so that personal finance accounts and statements are checked in on bi-weekly. The same goes for your business finances.
If your bookkeeper handles 99% of your business finances, schedule in a quick weekly call or detailed email report so that you can stay on top of your business finances without spending more than 15 minutes a week thinking about them.
Questions? Comment or email Miranda@MirandaMoneyCoach.com
As always, nothing on this site is financial advice. All content is for education and entertainment purposes only.