Pat F, Guest AuthorAug 20, 2018 @ 10:23PM
We all use different tricks to keep track of our money. In our personal lives, it’s a necessity; after all, you can’t spend money on airfare to Hawaii if you need it to pay the rent. Well, the same thing applies to those of us who run businesses. As much as we’d like to cash a customer’s check and blow it on some new equipment or a nice vacation, we have to pay our employees, take care of the bills, and ensure financial stability if we want to stay in business.
Here’s just a sample of what you likely have to deal with financially just to maintain a state of normalcy, month-to-month:
Rent on facilities
Monthly payments for vehicles
That’s a pretty long list, but it’s really only a sample. Consider what happens when you have exceptionally big jobs or have to hire new employees. The additional paperwork, bills, and outgoing finances could add substantially to this list.
The key to successfully managing your money is to be organized. OK, that’s easier for some of us than others. But here are some things you can begin to do right now to make the job of financial management easier for you while helping you prepare your company for long-term success:
First off, you need separate bank, checking, and credit card accounts for your personal and business expenses. Believe me, if you don’t, your life could get very complicated.
For one thing, you need to be careful about what you’re paying for. If you blend your finances and pour it all into your business, you might end up with nothing left to keep your house and family expenses. And if you spend on personal expenses from your business account, you could find yourself unable to compensate employees on payday.
When you pay your bills on time, you benefit in two key ways: 1) your credit score is improved, and you may need credit, later on, to make purchases and grow the business; and 2) the vendors you work with seeing you as reliable and low-risk. Someday, if you need a break from them or want to negotiate a deal, you will have already established yourself as a trustworthy partner.
Some key ways to ensure you don’t miss bills include:
Schedule reminders for yourself to pay the bills once/week or twice/month. Whatever works for you is fine, but just ensure they are paid on time.
Auto-pay is a great way to address bills that are regular (monthly, bi-monthly) and usually in the same amount.
Have a reliable “to do” box. Some of us need physical reminders, so get a good spot on your desk, put the bills in there, along with a reminder to “pay by Tuesday."
You’re running a business to make money and create a strong financial foundation for yourself. To do that requires you to set aside money for the future, and that means you have to save some of what you earn.
You may have heard the term, “Pay yourself first.” Well, it’s totally applicable here. Determine a reasonable amount you expect to have after paying your bills, your salary, and a cushion against unplanned expenses. Take that and put it into a savings or low-risk investment account like a bond or index fund. Maybe sure you do it every month; it may even be helpful to calendar that as a monthly action item.
Insurance is a necessary expense, but having the right kind of insurance could prevent financial catastrophe in the future. You should consult a trusted insurance or financial advisor, but the key types of insurance include:
Auto insurance on all your vehicles.
General liability insurance to protect against damages you or your employees might allegedly cause to a third-party.
Worker’s compensation insurance for employees who get injured.
Errors and omissions insurance in case a customer sues you for failing to comply with a contract.
Property insurance if you own or rent your own facility.
These are just some of the types of insurance available to you. And don’t worry, while this may seem like a lot of different pieces, most businesses can bundle many of these for very low monthly premiums.
You will need to pay for supplies and other things that enable you to deliver excellent service, but be smart about how you spend. Get to know your suppliers so you can negotiate bulk deals or lower rates for being a frequent buyer. Make sure you don’t fall in love with the latest gadgets just because they look cool; that’s a sure-fire way to burn an unnecessary hole in your pocket. Also, if you perform maintenance on the things you have, you’ll ensure longevity and cut costs in the long run.
You likely need employees to make purchases on their own to fulfill jobs. That’s all totally fine, but you have to make sure you have an accounting of those expenses. Rather than rely on employees to hand deliver receipts, give them expense cards that have a cap on the amount they can spend. That will help you maintain accurate, real-time records of what’s been purchased, and will enable you to have authorization power for big-time expenses.
You’re running a business and you should be paid for the work you do. Granted, some customers don’t or can’t pay for jobs immediately upon completion, but you need to have contractual requirements (net-30, net-60) and then track them. If a customer hasn’t paid in time, you need to call them up with a reminder. Be diplomatic and kind, but don’t let customers go too long without paying you. Set reminders in your calendar and make sure you’re getting paid what you are owed.
You can’t keep track of bills and invoices with Post-It notes. Do yourself a huge favor and invest in tools that automate much of this kind of work. Expensify gives you an easy-to-use tool to pay bills, while Housecall Pro can help you send and track invoices all from a single interface.
It’s not easy to maintain your accounts when you have so many moving parts. Even for a small, simple business, you’re looking at accounts payable and receivable as a continuous, multipart thing you need to manage. Whether or not business finances are something you enjoy or are good at, they are a “have to”.