#21: 4 OF THE SMARTEST THINGS YOU CAN DO AS AN ENTREPRENEUR

In this short but impactful episode, I’ll share the 4 smartest financial habits every entrepreneur needs to adopt. Whether you're a seasoned business owner or just starting out, these essential practices will help you organize your finances, protect your assets, and guide your business toward success. 

Resources Mentioned:

• Episode 2: Don’t Fudge It Just Budget
• Episode 11: Understand Your Profit & Loss Like a Boss
• Episode 12: Understand the Meat of Your Balance Sheet

Helpful Resources:

• Free Estimated Tax Guide
• Get my Estimated Tax Tracker

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GUSTO 

Recommended bank and the one I use in my business (affiliate link):
RELAY BANK

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My favorite budgeting app w/ an amazing free version:
EVERY DOLLAR BUDGETING APP

My preferred business credit card with cash rewards (affiliate link):
 If you have healthy behaviors around spending with a credit card, this is a great one to use and earn cash back. It also links up well with QuickBooks Online. If you have unhealthy spending habits with credit cards, please avoid using one! You need to be able to pay it off monthly and not carry a balance. I use this one for my business and it makes paying bills simple.
CAPITAL ONE BUSINESS CREDIT CARD

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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

Hello there friend! Leslie here with Financially Adjusted and I am so happy you're back with me today. This is a very short and sweet episode, but a very important episode. Today, I’m going to be going over four of the smartest things I think that you can do as a business owner. And these are ones that I would probably just rank the highest above anything else. If you continue to follow me, you're going to hear this from me all the time because these are so so important. And if you put these into practice today, whether you're a new entrepreneur or you've been in business for a long time, it is never too late. And if you're a new entrepreneur, you can really start on the right foot by putting a lot of this into practice. So today we're going to be covering my four smartest things you can do as an entrepreneur. I'll dive into these all a little bit deeper but going to lay them out for you first.

Number one keep business and personal separate. Number two, analyze expenses and financial statements monthly. Number three, save receipts and important documents digitally in a central location. Four, create a business budget and stick to it.

So, we'll get into the first one which is keeping your business and personal separate. This one is a big deal. If you are in business, whether you are just operating as a sole proprietor or you have an LLC or an S corporation or regular corporation, it's vital that you do this for a number of reasons. And I think a lot of people tend to mix thinking oh it's no big deal. It's just flowing you know into my life and I'm just going to go ahead and you know the groceries with my debit card for my business or you know it's no big deal .I'm paying myself anyways I might as well just when I'm shopping I'll just use the business card. Get out of this habit right now.

I'm going to challenge you to think of your business as its own thing because it is especially if you have an LLC, it's even more important to protect your personal assets. Even though, it all kind of flows through together- yes, your business is paying you, but it is its own separate entity, It needs to be treated that way. You need to have a separate business bank account, and you need to make sure that all that's flowing through that business bank account is business transactions. And same with your personal.

Some of the benefits of doing this is that you're going to protect your personal assets if you're an LLC. Because if you have that business entity it creates a legal shield for you and you pierce the corporate veil so to speak when you use your business accounts for personal. You kind of diminish that protection so to speak. I am not here to give legal advice but I'm just going to touch on that as being super important. You can look that up. You can talk to any lawyer and they'll tell you that is a thing.

You want to make sure that your personal assets are not on the line for business. And when you pay for personal stuff through your business, you are muddying those waters. So, you're setting yourself up to be susceptible for legal repercussions if anybody would sue you.

Another benefit is also that you're going to have more clear more organized and accurate finances. You're less likely to miss business deductions because oops you paid for it personally and you forgot to record it in your business books. And it's just way more professional. If you go to get a loan, or you want to sell your business someday, you want your finances to be tight. If a lender asks for your business, financial reports, you want those to be professional. You want to show that what's flowing through the business is business stuff, business transactions that you don't have everything mixed and it's all confused.

And then when somebody wants to buy your business. I don't know if that's going to be relevant for you but of you will want to sell your business at some point in time. When that happens, they are absolutely going to want to look everything with a fine tooth comb, and they're going to see if your personal transactions are seeping in there instead of just you paying yourself. If you're running to the grocery store with your business card your you know paying for your kid's dance lessons through the business card, that is going to  look incredibly unprofessional, and it's going to throw up a red flag that maybe you haven't been running your business in a professional manner in other ways. So, you want to keep your finances tight. You want to appear professional and organized and by keeping your business and your personal transactions and bank accounts separate you'll set yourself up for success currently and down the road.

The second smart move you can make as a business owner is to analyze expenses and financial statements on a monthly basis. By staying on top of your expenses and really looking at all your costs on a monthly basis,  you're going to more likely catch unnecessary ones. So, all of those subscriptions that you signed up for that are automated you know if you're not using something anymore it's not really going to be on your radar unless you're looking at your expenses on a monthly basis. Even if you have a bookkeeper, they’re likely going to catch like if there's transactions or fraudulent transactions, but you're the one calling the shop at the end of the day when it comes to what's necessary in your business and what needs to be cut. So, you need to keep your finger on the pulse of where your money is going. You want to hang on to as much of your revenue possible so you really need to look at what's going on between your top line revenue and your bottom line,  which is your profit. You need to make sure that you're being very diligent about where that money is going.

You also want to be taking a look at your statements on a monthly basis. And when I say statements, I mean your balance sheet and your profit and loss statement. Your financial statements tell you how healthy your business is and by looking at those and analyzing those monthly, you are essentially you're paying attention to your business. You are saying, I care about the health of my business and I want to know what going on. You are going to be catching those expenses that shouldn't be coming through your business that you need to cut off you're going to be seeing where you're heavily spending in some area is and you maybe need to pay more attention. You're going to be able to assess your revenue and see how healthy your top line is and compare from month to month and just see if they're any revenue trends and that kind of thing.

If you don't know how to read reports and this is all feeling very confusing or scary, go back to episodes eleven and twelve I break down balance sheets and profit and loss statements and go through what they're made up of and how to understand them and what they're telling you in your business.

But your profit and loss is probably going to be a more important statement to pay attention to on a monthly basis. Because that's going to be telling you how much you brought in for that month, how much you've spent that month, and how much is left over. And although, it's important to track your revenue and make sure you're growing and comparing from month to month and year to year, what's super important is what you're keeping from that revenue. That's why it's important to really be evaluating what you're spending each month because that's your money going out the door. It's a pretty big deal if your costs are too high, you need to identify why and where. And you want to really make sure you're keeping the amount of money from your revenue that you need to pay yourself, to pay off debt,  to be able to grow and save money in your business.

And if you have a bookkeeper and accountant make sure you are checking in with them You'll see if they'll sit with you once a month until you get the hang of how to read the statements and specifically what's going on in your business because that's their job to guide you and help you know your numbers and make sure you know how to read those statements that they're sending you each month.

The third tip is to save your receipts and all of your important documents in one central digital location. There are free options like Google Drive so you don't even necessarily have to spend money on this. And if you have an accounting software that is online like QuickBooks online, you might have an app available to you where you can snap receipts. So those paper receipts that are like going to fade over time when you put them in the filing cabinet,  you can just snap a picture of those. And they're going to pop up in your accounting software you can save them there.

You can take a picture just with your phone and then save that digitally in your Google Drive. But the key is to be organized with this because if you need to reference any of your receipts or when it comes to tax time your account professional wants to look at receipts. That’s just going to be so helpful having them in an organized location. You can create folders by year, by month. And I actually have an organizational episode that I did. It was episode number thirteen. Organization is the base of your financial foundation and that's going to walk you through a detailed guide of how to get organized, and I even have a free PDF that you can download from that episode, and it's just going to be a really good guideline for how to gain control in your business. Organization for me is I feel like the start of feeling like I'm in control whether it's with my business or at my house. I can't even stand to be in my house when it's disorganized. I can ignore it for a little while but then eventually you need to  declutter your space. So that you can feel like you're in control and feel more clear and professional. And this in your business will give you more than you think it will. It will make you feel in control which builds confidence. And then that clears your mind to focus on other things. You're not going to feel like I'm so scattered you know I'm so unprofessional and then when your accountant or if you get audited - I don't want that to happen to you - but if you get audited, you're going to feel like okay I'm professional I got this. I saved all my receipts in one place. It's no big deal I'll just get them what they need. And at tax time every year, you don't want to be scrambling to find everything at the last minute. You just want to have one central location where you can easily find things. You can share whatever place you've decided to save things with your professionals, like your bookkeeper or your accountant, so that they can find things easily. It just makes everything flow a little bit better. And you'll thank yourself later.

The fourth tip I have for you today is to create a business map. And that is a money allocation plan which is the same thing as a budget but I don't necessarily love the word budget. It doesn't bother me too much, but I know of people really cringe and have a visceral reaction with the word budget. So, creating a money allocation plan is what I like to call it. Or your map… your business map. So, a money allocation plan is just you telling your money where it's going. So, looking at your financial statements is awesome. You're doing that. Props to you. You are zoning in on what's happening in your business, but this is historical data. You want to get into a place in your business where you are proactive.

And before your money is even coming into your business you have a plan for it. You are the one directing where that money's going to go, which is going to give you ultimate control in your business. And I know this doesn't sound very fun, but I promise you this can actually be a fun thing. Like once you dial this in and you get more comfortable with it on a monthly basis. When you set goals and you have a vision or a dream of like where you want your business to go. When you can map that out with your money via this plan, this proactive plan, you'll actually look forward to doing this plan. I promise you it does feel fun when you're in a place of building towards your goals and your dreams. And you're not looking in the rearview mirror you're looking forward to those dreams and you're creating a plan to make them happen.

You're taking every cent that flows into your business and you're telling it where it's going to go and how it's going to get you to your goals. Check episode two I do call it a budget a lot in episode two so I'll warn you but it's so helpful to really get those tangible steps or those tactical steps to get you started with creating one. And I do have a YouTube tutorial on that as well. Definitely plug into episode two for that. But you can zoom out or in as much as you want on this budget the key is just too nail down where your money is going, when it flows through your business and where you're sending those dollars. You're being proactive and you're planning versus looking back.

So, if you're feeling completely overwhelmed with all of these four steps, whether you are new in business or established, just take it one step at a time. You do not have to nail these down perfectly when you start out. Once you put these in motion month after month it's just going to be common practice. You won't even think about it It'll be second nature and you'll be so much more comfortable doing all of this. Just take it one step at a time. Take one of these tips, one of these actions, and do it one day, implement it on one day, focus on it, then pick another step do it another day. It does not have to be overwhelming if you don't let it be.

But remember action brings clarity and imperfect action is better than no action. You've got this!