Here is a truth every entrepreneur knows and has experienced whether you’ve been in business three months or thirteen years. When we are first dreaming up and creating our businesses, there are precisely a million and one things on our “to-do” list. And it can be overwhelming AF.
THE NEVERENDING TO-DO LIST
We have all been there. If you aren’t thinking about your branding, you’re figuring out production. If you aren’t figuring out production, you’re devising your social media strategy. If you aren’t devising your social media strategy, you’re concerned about your website functionality. If you aren’t concerned about your website functionality, you’re thinking about your target audience.
And above all those things, you are CONSTANTLY thinking about money. How am I going to fund this? How do I properly collect payment? How do I budget for this business? How do I separate what I spend on my personal life and what I spend on my business? What tools should I use to keep everything straight?
FINANCIAL LITERACY
It is the BRA Network’s mission to keep you educated and informed on steps you should take to make your business run smoothly, efficiently and legally. We want you to set yourself up for success from the jump, so we’ve gathered some information to help each one of our Members have as much financial literacy as possible.
We chatted with BRA Member Taylor Bitsoli, founder of Bookkeeping Brunette. Bookkeeping Brunette is a boutique accounting and finance agency that specializes in helping female founders and entrepreneurs understand the financial side of their business. Taylor believes that financial data is some of the most important data you can have as a founder, but yet is some of the most underutilized as many female founders have never been educated in finance and accounting.
7 STEPS TO TAKE RIGHT NOW
We asked Taylor to tell us 7 things that small business owners should do immediately when starting their business to keep their finances organized:
- Open a business bank account, savings account and business credit card. So many small business owners fall into the trap of using their personal cards, which creates a nightmare for themselves come tax season! Even if you promise yourself to keep everything to one card and not to use it for any personal transactions, this never happens! Then you are stuck going through hundreds of transactions at year end. Save yourself the headache and get a business card or pay for everything out of your business checking account until you can open a business credit card.
- Stop using your business account for your personal expenses. This is the easiest way to have your business fail. When using your business account to pay for personal transactions your business often feels unprofitable when in actuality most of the expenses going through the account are your personal transactions and not business transactions. So many founders don’t realize this and are shocked once they have proper bookkeeping that their business is in fact PROFITABLE. Pay yourself an owner’s draw to cover personal expenses. An owner’s draw is when you transfer money from your business account to your personal account in order to pay yourself for Sole Proprietors and LLC’s. You can still do an owner’s draw as an S-corp, but you will also have to pay yourself through a payroll.
- Don’t fall for the 0% financing on credit cards – This is where I see a lot of founders go wrong. They open a business credit card and get 0% financing for a year. They make a bunch of huge investments in their business and then don’t have enough money to pay the card off in the 12 months and end up paying interest on all the “investments” they made. If you are going to make larger purchases when starting your business make sure you are setting aside money on a regular basis to pay down your credit card or divide the balance of your credit card by 12 months and make equal payments if everything is bought within the first month. 0% financing can be a great tool if used properly but can also cause a lot of over spending.
- Set aside money for taxes – This is where so many business owners go wrong! I recommend setting aside between 25% to 35% of your profit each month; profit is what is left in your business after your expenses are taken out (sales-expenses=profit). If you have a negative profit — that means your business is operating at a loss — you should still be setting aside money for taxes. If anything, you will have extra money saved at the end of the year or can use that money for future year tax payments. If you are operating at a loss you can set aside less than the 25-35%, but I would suggest talking with your CPA to make sure that what you are setting aside is sufficient so you’re not hit with a huge tax bill you can’t pay.
- Create a business emergency fund. Yes you should have an emergency fund for your business, too! Especially if you are in the early stages and are thinking about leaving your corporate job. This fund should have 3 to 6 months of business expenses. That way you always have enough money to pay yourself and your team! Remember if you are hiring a team you need to make sure you have enough money to pay them each month.
- Bootstrap as much as possible – you don’t need all the fancy things when starting a business. Save money where you can and make investments in areas of the business that are revenue-generating! There are so many free resources online that are under utilized. Use those before you pay for the fancy and expensive programs!
- Educate yourself on accounting and finances. It is not our fault we are never taught these things, but as a founder it is your job to understand all areas of your business, not just the areas you love. Even if you outsource your bookkeeping you still need to understand what the reports mean so that you can use that data to grow your business!
Okay, we know you might feel a little overwhelmed by this list, but knowledge is power and we know putting in this work up front will make a HUGE difference in your business. Getting everything in order now will make tax time next year much easier!
For more support in your entrepreneurial journey, consider joining the BRA Network!
Taylor Bitsoli is a Small Business Financial Strategist who provides accounting & finance support for entrepreneurs. She really knows her stuff and we are so thrilled she was able to provide us with some incredible tips and tricks. If you are interested in learning more about Taylor, please follow her on Instagram and connect with her on LinkedIn.
And check out her new podcast, THE BLABBY BRUNETTE! Get ready to dive into the world of accounting, personal finance, and entrepreneurship with Taylor. She’ll demystify the complexities of bookkeeping and empower you with financial tools. Listen now!
