By - Shiv Patel
As a small business owner, you probably ask yourself questions such as, where am I spending my money? Or, do I have enough money for the month?
Keeping up with your books can feel overwhelming and BORING. You tell yourself every day that you will get to those piles of receipts, but the days seem to fly by. Soon tax season comes around and you cram to get your data into an accounting software to get up to speed. I know what that feels like. I have seen it and I have been there myself.
📷I started my own bookkeeping business at 19 years old. I didn’t know much about setting up a business, but I learned early on that I was pretty good at accounting and that accounting is essential to every business. I thought to myself, how difficult could this possibly be? My first client was a handbag designer who knew everything about handbags and nothing about the fundamentals of finance to keep his business going. So, when I learned about his terrible spending habits and lack of documentation for those expenses, I knew it was going to be a long journey. I spent countless nights sorting through hundreds of receipts and manually entering them line by line into his accounting software, QuickBooks. I had to print out bank statements and mark each line one by one with a pen to give him a picture of how much money he had to operate his business. I quickly learned that most businesses operate this way. From the handbag designer to multi-million dollar companies, they all have the same problems: an archaic way of managing their accounting, falling behind on their day to day accounting, and lack of advanced technology to make accounting for their business seamless. Accounting software has not changed much since the 90’s and the software available today is still tailored towards Accountants. However, it does not have to be a tedious process and you do not have to be an accountant to stay on top of your finances. Your main goal is to not fall behind.
Do this quick exercise at the beginning of each month:
· Open Microsoft Excel
· Follow the below format:
Ending bank balance from previous month= beginning bank balance for this month
+ (add) the total amount of cash you expect to bring in for the month (take an estimate)
- (minus) the total amount of expenses (take an estimate)
= Ending balance for this month
In our example, we estimated $1,800 dollars left to spend at the end of the month. While you still have to store all of your expenses and revenue at a detailed level in an accounting software, you now have a high level overview of how much money you have to spend to determine what you seriously need and do not need. This will start you off on the right track for business success.
Here are a few additional helpful tips about keeping up with your books:
1. Stay Organized: Take pictures of your paper receipts and store them in a folder on your computer.
2. Save Time: Look for automation software that will help you with your books. There are inexpensive ways to store your data so that you can spend your valuable time focusing on your business.
3. Save Money: Understand the nature of your expenses. While you know how your business works, you should know how to break down your costs into categories (i.e material, machines, subscriptions, etc.). This will help you gauge your monthly expenses.
Shiv Patel is the CEO & Co-Founder of Cratosys