#3: IT'S YOUR YEAR TO GET FINANCIALLY CLEAR

Are you an aspiring, new, or established entrepreneur who’s feeling a little or a lot fuzzy about your business finances? You are not alone, and this episode is for you! Having a clear picture of your small business finances and your personal finances can mean all the difference in the world when it comes to reaching your goals. You are absolutely capable of gaining clarity when it comes to your money and this episode is your guide!

Get my free checklist with the steps to financial clarity that I touched on in this episode: https://www.financiallyadjusted.com/5-steps-to-financial-clarity

Here are some tools and resources that can help get you on track with your business:

By signing up for QuickBooks through this affiliate link, you can get amazing discounts that you’ll never get anywhere else!
https://completebusinessgroup.com/leading-ledger-bookkeeping-llc/

I recommend ADP for payroll and use it myself in my business! (affiliate link)
http://accountantprogram.adp.com/accept/?EID=5453c160-167e-4c6b-aedc-893d78fb3f87&type=ShareUrl

Gusto is also a great payroll platform for your business! (affiliate link)
https://gusto.com/r/leslie4559

https://www.ramseysolutions.com/ramseyplus/everydollar
I use this EveryDollar budgeting tool for all my personal and business budgeting and love it! Plus, the free version is amazing!

Check out all my FREE financial resources in one place

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Disclaimer: This content is for educational and informational purposes only. Please consult with an accounting professional for direct advice based on your specific business situation.

Transcript

Hi there! This is Leslie with Financially Adjusted. And we're on episode three, "It's Your Year to Get Financially Clear." Thanks for joining me today. Are you an entrepreneur who is just starting out, or one who's been established in business for a little while, or even a long while? Are you sick of being fuzzy on where you stand with your business finances? Well, this episode is for all of the above.

Having a clear financial picture of your small business and your personal finances as well can make all the difference in the world when it comes to reaching your goals. When there's vagueness or fuzziness around your money, it's very difficult to make business decisions. For instance, if you want to purchase a new piece of equipment or lease a bigger space, or you just want to know how much you can afford to pay yourself. If you don't know what your profit is or how much of the cash in your account is safely usable, then you're just going at it blind. And you don't really know clearly what your steps should be.

Not knowing where you stand with your money disempowers you and makes you feel out of control. My guess is this is the opposite of what you want. It's hard to know what moves to make in business when you don't know if you have the resources to make those moves. And running a business is not an easy thing, and most entrepreneurs put their blood, sweat, tears, and heart and soul into their business. So that's just even more reason to really dial it in and pay attention to your finances and just know what's going on. You really owe it to yourself and your business to invest the time in gaining control. That lack of control inevitably trickles through to your personal life as well. When you don't know what's going on with the money in your business, you also can't plan or gain control of your personal finances. Especially if your business is your sole livelihood. Then this becomes even bigger of a deal.

So not only do you owe it to yourself and your business, but you owe it to your family and future generations of your family. So you've probably heard me talk about financial clarity if you've been following me at all. But that is my big thing, and that is what I want to bring to business owners. I want to give you clarity, which leads to confidence in your business. So what do I mean by financial clarity? When I say to get financially clear or get financial clarity, what I mean is having a realistic, clear, and factual picture of what is going on with your finances. This clear picture involves past, present, and future data. Actual factual data is what gets you to this clear picture.

And there are some steps that it takes to get there. I laid these out in a free PDF checklist that I have called "Five Steps to Financial Clarity." So that's just going to be your five-step guide to all the intentional, actionable items that it takes to get you to that point. So if you haven't yet, be sure to snag that. You can just go to financiallyadjusted.com, and it's very easy to find on the front page. But I'm going to touch on these five steps today and get into them a little bit.

So business owners are on all different levels when it comes to how in touch you are with your finances. Everybody comes from a different place personally and how they grapple with money, and their knowledge about it, their skill level. And there's no need to be ashamed around any of it. Everybody just comes from a different place. Some people in business are completely in the dark, and they're unsure if they're even profitable or able to make the next payroll. And some know that they're making enough to cover bills and payroll and pay themselves, but they're just not in tune with the actual numbers or the actual picture. They know they have enough funds, but they don't actually know what their profit is at the end of the month. And that means that they lack direction or goals for that profit.

And many entrepreneurs do bank balance accounting, where you really don't have any financial systems, and you're just checking your bank balance and kind of doing that nervous dance all the time where you don't quite know if things are going through. You don't quite know if you're going to have enough to make payroll, and you're just winging it day in and day out. Which can lead to a ton of stress. So please hear me that this is super important for you to flip the script on.

So let me be very clear. I am not here to shame anyone. My goal is to meet you exactly where you are and let you know that you're not alone and you are completely deserving of the many benefits that come along with getting control of your finances, especially peace of mind. That is huge in life. And that's what really leads you to confidence as well. I know so many amazing skilled entrepreneurs who simply didn't have the education needed when it comes to running that financial side of the business. It's just not common practice for some different fields. You know, for instance, I work with chiropractors, and like many other medical professionals, you know, they go to school to learn their skill, their specific medical skill. And I don't really think most schools are touching on how do you run a business?

But a lot of people go into business for themselves, so you know there's no need to feel shame for not knowing what's going on. If you're a business owner who hasn't had that education, how would you really know? But my goal is to encourage you to just plug in and learn as much as possible because you absolutely are capable of gaining control of your finances, and there's so much great information out there. It's my goal to bring you as much as I possibly can.

But um, beating yourself up about any financial mistakes in the past or neglect is not going to serve you. So no blaming or shaming. That stops here. We can walk through the steps together that are going to get you on the road to control and empowerment with your small business finances. Some of you might already have people in your corner that are educating you or helping you out when it comes to your finances. Some people, you know, have an outsourced bookkeeper or accountant that helps educate them. Some people have a spouse or partner that are doing their financial stuff, they're doing the bookkeeping, balancing a checkbook, paying bills, whatever. And if you're somebody who you recognize that you're maybe not the best with money, don't enjoy it, or just don't have the time, and you hired out for that. Props to you because you recognized you needed that in your business and you hired for it.

I know there's a lot of business owners or aspiring business owners that don't have the money when they're just starting out. And I do recommend down the road when you're in business and things are really growing, and you're able to go ahead and hire an outsourced bookkeeper as one of your first hires. Because that is going to really make sure you are keeping your finances in check and you're getting those monthly reports that you need. But if you're somebody who you really actually like numbers and you want to learn how to do the bookkeeping yourself. There's nothing wrong with that either. But many times the goal is to free up your time so that you can focus on other things, and that's okay.

Nothing or no one will take the place of knowing what's going on in your business. So if you do hire an outsourced financial person who's running the financials for you during the bookkeeping on a monthly basis, don't unplug just because you trust them and they've got it. Make sure you're still plugging in. Make sure you hire somebody that is going to show you those financial reports every month, they're going to have them for you in a timely manner, and they're going to help you understand them. That's huge. You know, hire somebody that is an open caterer and who isn't speaking on some higher level or in a condescending way. That makes you feel stupid because there are definitely people out there like that. But for the most part, I have come across so many amazing financial professionals and all it'll take is just a little bit of searching to find one that's good for you and that meshes with your personality. But anyways, I'll stop going on about why you should and start getting into the how. So we're going to go through this five-step financial clarity checklist.

And we're going to discuss each one a little bit. So the first one is knowing your business entity. And that may seem like a weird first step, but it's very important to be clear on how your business is operating structurally because this determines how you pay yourself. A common question I get among business owners is how do you pay yourself? And that always depends on your business entity. If you're a sole proprietor, an LLC, or just a sole proprietor that's operating under your social security number with a DBA, you are going to just simply pay yourself through what's called owner's draws. And that just means you're transferring money from your business bank account to your personal account. So that's pretty simple. Now if you are an LLC being taxed as an S Corp, you're going to be required to pay yourself as a W-2 employee. And you can also take owner's draws on top of that. But if you are going to be filing as an S Corporation, you want to make sure that your tax professional is speaking good information into this as in what is a good reasonable salary for what you're doing in the business. And what are a good amount of draws that you can take reasonably within business.

We're going to move on to the second step, which is establishing monthly bookkeeping. So we talked about this just a little bit but monthly reports are absolutely essential in order to have your finger on the pulse of what's going on with your business finances. This needs to be a non-negotiable. So even if you don't have a lot going on in your business, and you know you just have a small amount of transactions each month to start out, it is so important to get into the habit, big or small, in the beginning, to dial into your financial reports monthly, understand them, understand how to read them, and what your numbers are. You cannot make sound business decisions or realistic business goals when you aren't even aware of your profitability or what your numbers are. Let me say that again. You cannot make sound business decisions or set realistic business goals when you aren't aware of your numbers.

The reports that you need each month are a balance sheet and a profit and loss statement. It's also not enough to just be receiving these reports if you have an outsourced professional that provides them need to understand what they are telling you what are these reports telling you. So find somebody that is, you know, a good communicator here like we talked earlier who's going to jump on a Zoom call with you share your screen and navigate you through all it. Number three, tracking and analyzing monthly expenses. So this one is very important, and this can be a real money saver.

Many times business owners have a vague idea of what's being spent in their business. They generally know but when you really zone in and look at everything and analyze it, you'd be amazed how much money you can save and how much you're paying for that you're not actually using. Many business owners have a majority of their bills on autopilot, which can be very handy and efficient because then you're not just paying bills all the time but that also can mean that subscriptions and payments get in the shuffle and It can be, you know, really easy to forget what you have subscriptions for and what you're paying for. So it's a good idea to assess on a monthly basis what's being charged to your credit card or your bank account and really go through the profit and loss statement and look at all those transactions. Not only will you be clued into subscriptions or purchases that you're no longer needing, but you also catch fraud charges duplicate charges that kind of thing. Sometimes there is an outsourced professional or an in-house in charge of this for you like maybe an office manager that pays your bills or an outsource bookkeeper, but this can be a a big deal in catching anything that's not on the up and up. And it's your responsibility and duty as an entrepreneur keep your expenses in check and plug in where your hard-earned revenue is going because nobody else is really going to be as concerned about it as you are. So you want to assess the big and the small stuff So those big line items that eat away at your payroll I'm sorry eat away at your profit, um like payroll, supplies, cost of goods sold, advertising. They're not the only important ones to pay attention to. A lot of the smaller expenses that add up are usually things like office supplies So if you get a lot of stuff off of Amazon, uh maybe have office manager that's ordering things for you on Amazon it's not a bad idea to just check-in every once in a while on there and maybe see if you can find things a little bit more cost-effective and just assess if you actually need all the things that are purchased. And for advertising, um you want to make sure every once in a while check-in, make sure that you're getting an ROI on the advertising that you're using. And that it's effective in just resulting in actually growing your revenue. Number four in our five-step Guide is to create and follow a realistic business it And I have an episode that we just did the actually it's the last episode, and that is all about budgeting and then there's also a YouTube tutorial So I highly encourage you to plug into that, um and get yourself a budget That's at least three to six months in advance. A realistic budget is absolutely essential in my opinion. It's a necessary step when it comes to navigating your goals Otherwise you're just kind of floating along and you have no plan and no direction for your money So it just disappears. Along with understanding financial reports and analyzing expenses, following a realistic budget elevates you. It elevates your growth your success, and really just puts you in charge It puts you in the driver's seat of your business Number five is to allocate your profit properly. So as far as what's left over at the end of the month A lot of times a big misconception with profit is that it's not the same amount that's sitting in your bank account So you might see on paper that you made a certain amount of profit and you don't have that much in your bank account So You're wondering where it went. Well what happens is that the amount of profit on your statement is it's just technically income minus expenses equals profit but what we tend forget is that out of that profit, you've also used a portion of that already to pay payments on or to pay yourself as an owner's draw. And those actually are balance sheet accounts So you're not gonna see those show up as expenses on your profit and loss. So they can be easily forgotten. So each month when you're looking at that profit on your profit and loss statement, remember, if you paid yourself any draws or you paid principal pants on loans. That that's not gonna show up there So you have to assume that those things have already come out of that amount. But that profit on your P and L statement is going to be what you actually pay taxes on. So one of the most important things that you can do is to look at that profit each month and set aside money for tax savings. I suggest saving at least twenty-five thirty percent of profit each month for taxes This is just going to ensure that you have a nice cushion there that's ready to go for paying all your quarterly payments or what you know owe at tax filing each year. And then you're scrambling trying to come up with some huge lump sum of money if you owe taxes. You want to make sure that you set that aside into a savings account that is out of sight out of mind So you can put it into a savings account that you don't necessarily see all the time then that's always setting yourself up for success versus you know seeing it all the time when you log into your bank You might think oh I can do this then I could do that with it but just make sure you set aside and pretend it doesn't exist because you are really gonna thank your future self for this Now as far as after setting aside that tax savings, The remaining profit can be divided up into you know paying off debt if you have debt paying yourself and you know saving or reinvesting into the business. But as far as that goes it's gonna depend where you're at in your business. And where your goals are. If you have debt, I do recommend leaning more heavily on paying off your debt with any leftover profits. But if you don't, then you can allocate a certain amount for a savings goal that you have or just to save for whatever reinvestments, education travel whatever comes up that you wanna do, and also paying yourself…So at the end of the day, The moral of this story is being intentional of these five steps will absolutely level up your business success. If you're new to all things finance and business, learn as much as possible and just take it one step at a time. It's really something that is a practice so you're always gonna be kind of tweaking a budget your always gonna be analyzing expenses…and periodically checking in with all of these things.

And once you get more comfortable in managing all these different financial facets of your business, it won't always take as much time you know your check ins with…expenses your check ins with your reports etcetera, will end up being more of a quick thing that it is in the beginning.

Hope you enjoyed today's episode. If it brought you value, I'd really appreciate if you follow me and if you know of anyone who could benefit from this information, please feel free to share it…

Disclaimer: This content is for educational and informational purposes only. Please consult with an accounting professional for direct advice based on your specific business situation.