Keeping tight control of the finances is an essential part of running a successful business—especially when that business is just getting off the ground. However, without prior experience in business finance, new entrepreneurs may face a large learning curve at first.
From bookkeeping to payroll to estimated tax payments, there are numerous aspects of your business finances that must be kept in order. To help you brush up on the basics and build your confidence in managing your records, 14 Forbes Finance Council members shared some recommendations for new business owners.
Members of Forbes Finance Council share ‘Finance 101’ tips for new entrepreneurs.
Photos courtesy of the individual members.
1. Create A Simple ‘Cheat Sheet’
When I started my first company, it was difficult for me to keep track of every financial transaction, so I created a “cheat sheet” that tracked revenue and expenses. That helped me understand where we were on a fundamental level, without getting lost in the minutiae. Cash flow is everything when you’re starting out, so this needs to be a priority. – Julie Fergerson, MRC / Merchant Risk Council
2. Set Up A Single Business Account, And Record Everything
Do not use personal accounts for business, and record everything! By running everything through a single business account and recording all transactions within that account, you will have a more accurate depiction of your business finances. Many entrepreneurs do not set up a basic system of records that allows them to access the information they need to make proper decisions. Keep it simple. – Joseph Orseno, Tiltify
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3. Separate Your Funds
Build a simple system to separate your funds. The four categories I used when starting Wendell Charles were a checking account for business operating expenses, a checking account for payroll only, a savings account for quarterly taxes, and an investment account for excess cash. It’s easy to know your “runway” by calculating cash within your operating account divided by monthly expenses. – Evan Kirkpatrick, Wendell Charles
4. Hire A Financial Professional As Soon As Possible
Most business owners don’t maintain timely, accurate financials, and if they do, they don’t know how to interpret them, what actions to take or how to protect their hard-earned money. Hiring a financial professional early on will help you interpret and analyze your financials and find tax-reduction strategies to help your business thrive even in a challenging economy, allowing you to make more money, save time and create magic in your life. – Taruna Kanani, KB Tax Deviser CPA
5. Open Business Credit Cards
Make sure you separate your personal and business expenses by opening business credit cards. You don’t want to use your personal credit cards or personal bank account for expenses that should be for the business. Not only will the record-keeping get messy, but if you max out your credit cards or forget to pay the bill, the business expenses can affect your personal credit scores. – Jose Rodriguez, Got Credit?
6. Organize Your Reports And Metrics
Focus on organizing your financial reporting and metrics. This is often overlooked, but it is critical, especially if and when you’re preparing for an exit. To get there, make a strategic investment in hiring experienced professionals who will help you to organize and manage your books up front. Then you can focus on running the business while they keep things in order. – Peter Goldstein, Exchange Listing LLC
7. Use Business Software To Full Advantage
Properly use business software to help you track all your record-keeping. A modern system allows you to keep all the digital records of your business in one place. You can upload receipts and pay your vendors; track sales, costs and profits; monitor inventory; and more. Keep this system as the accurate source of truth, and keep records as though you are preparing to be audited. Accurate business records are essential. – Dave Sackett, Visibility Corporation
8. Stick With A Solution You Can Understand And Fully Use
New entrepreneurs often implement systems they don’t fully understand or haven’t invested time in learning. Keep it simple, work within your means and expertise, and right-size the solution for your business. If you can only stick to Excel, try to maximize its potential. At the very least, you will have a more accurate record-keeping system than if you adopted a system you don’t know how to use. – Luz Urrutia, Accion Opportunity Fund
9. Find The Right Tech Tool For Your Situation
If you’re running a small business, you can use artificial intelligence tools, but entrepreneurs also need a good bookkeeper. Systems including Expensify and Xero offer complete services, minimizing entrepreneurs’ stress over areas they don’t understand very well. If you’re a self-employed individual, record-keeping services for managing taxes, such as FlyFin, capture real-time, digital transactions from banks and credit cards, eliminating the need to save receipts. – Jaideep Singh, FlyFin AI, Inc.
10. Always Look At Your Bank Statement
There are plenty of ways to make mistakes in record-keeping, but your money coming in and out should be reflected accurately in your bank statement. A bank statement is not a substitute for reporting, since it doesn’t take into account what you owe or are owed. However, reviewing it is essential, since it reflects all cash movement and how much money you have. – Aaron Spool, Eventus Advisory Group, LLC
11. Set Aside Time Each Day To Work On Your Financials
When you’re running a business, it’s easy to get caught up in the day-to-day grind and overlook the details. I find that many of my record-keeping errors happen because I crunched numbers in a hurry to get to something else. Try to set aside dedicated time every day to handle the business side of your business, especially when it comes to managing your books. – Kathleen Craig, Plinqit
12. Perform Monthly Evaluations
Having a great accounting system is a must, as is performing monthly evaluations that include a reconciliation of data to ensure accuracy. You should also bring on qualified people to review the data to ensure compliance and accuracy. – Crystal McCullough, The Spearhead Group Inc
13. Stick To A Budget
One of the “basics” is business budgeting. New business owners often overspend themselves out of business. There are many other benefits to having a budget besides saving money. A budget will show you how to prioritize short- and long-term tasks, improve relationships through business transparency, and make it easier to obtain a business loan when needed. – Jared Weitz, United Capital Source Inc.
14. Document Everything Digitally
I advocate the same practices for entrepreneurs as I do for those for whom I broker acquisitions: Keep your books clean, and document everything digitally. The availability of affordable financial software that covers all your bases means there’s no longer an excuse for sloppy record-keeping. Also, hire an expert to help you set these processes up! – Amanda Dixon, Barney
