Your business is running, you have customers and your startup phase is going well. But your work and personal accounts are still blended, and keeping track of both is increasingly challenging. This very normal conundrum leads to the inevitable, pressing question – how do you get your business finances in order?
First off, remember that this doesn’t have to be a complicated process. With just three steps, you can get started managing your business finances simply and efficiently.
Step 1. Open a separate bank account for your business.
Go to your preferred bank, whether online or local branch, and open a business account.
Start to deposit revenues into your business account. Start to pay all expenses from the account. If you pay for something personally, submit your business and expense reports, and pay yourself back. (Don’t gripe about the expense report suggestion either – you’re the one paying for stuff out of your personal account. We recommended paying everything out of the business bank account in the first place.)
If your business is not cash flow positive yet, write personal checks to the business account to fund it. Having a separate account will help you figure out later how much you have put in the business through loans or additional equity contributions. (Loans vs. equity is a whole other topic; for right now, just take our advice and set up the separate bank account.)
Step 2. Get a business credit card.
Get a business credit card. You can do it. If you followed step one, you have a bank account to use for making payments. A bank account isn’t enough. You have to order things online for your business, and credit cards are the way that people do business. And be disciplined – only use the business card for business.
(Not separating personal and business finances is one of the worst mistakes people make when they are trying to decipher how their business is doing.)
Step 3. Get an accounting system.
This does not mean an old school method like a shoebox, Excel, or GoogleDocs. It also doesn’t mean something massive and expensive Oracle or SAP. Aim for the middle ground. A low-cost solution like Quickbooks Online or Xero are perfect tools for you to use when you’re getting started. Make sure you integrate your bank account and your credit card into the accounting system (we can help you).
You’ll need to classify transactions on occasion and reconcile accounts, but you’ll have set up the bulk of your financial function and you will have automated the majority of your businesses transactions, right out of the gate. (Trust us. It’s much simpler to scale if you’ve done this first, rather than trying to do it retroactively once you realize your business is growing.)
That’s it! Three simple steps and you have a great start to orderly business finances.
Still have questions? Don’t have time to manage the day-to-day bookkeeping? Talk to us.
What other financial first steps that helped your startup…or that you wish you had made?