6 Things Every Business Owner Needs to Know About Money (2024)

Do you find yourself getting frustrated with your business finances because you have SO many questions and you just don’t feel like you know where to get answers? If this is you, then taking a peek at the answers below and say peace out to all those lingering questions that are bogging you down.

I’m going to answer the 6 most common questions I get asked about when it comes managing money in your business. I’ve gone through over 100 questions I’ve been asked about business finance and picked out the 6 questions I get asked ALL THE TIME. Whether you’ve been asking these same questions or you’re just curious about the answers, I’m giving you all the deets so take a peek. Hey! That rhymed.

I’ve also created a super awesome resource guide jam-packed to the brim full of worksheets, processes, spreadsheets, and cheat sheets that you can use to navigate your bookkeeping efforts as you explore these answers.

Watch the video below to get the whole shabang or check out the recap under the video. Let’s jump right on in!

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How do you stay on top of your bookkeeping? (3:15)

How in the world are you able to do all of this important bookkeeping stuff when you have client work to do? Because the struggle is REAL when it comes to taking care of your own business.

This was something that I personally struggled with A LOT when I was a new business owner. So my answer to this question comes from my own personal journey with figuring out how to balance client work and the things I needed to do to run my business. And during this journey, I realized that there are two types of work in your business.

There’s external work and there’s internal work. Here’s the difference.

External Work vs. Internal Work (4:10)

External work is the work that you’re doing for clients. It’s the front facing work that you present to the world. My live show, for example, is external work. You see the final product as I present it to the world but there’s a lot of time and work that happens behind the scenes.

Then there’s the internal work in our businesses. This is the work that usually gets blown off in favor of the external work. The internal work is all of the operational things that we have to do to keep our business running. Bookkeeping, for example, is internal work. You don’t present your bookkeeping for all the world to see but it’s something that’s happening behind the scenes to ensure that your business is operational.

Schedule Your Internal Work (5:24)

Accept that in order to have a sustainable business, there must be a balance between the external and internal work. Start to build internal work into your schedule. If you have five days a week and eight hours a day in client work, it’s going to be REALLY hard for you to do the internal work.

So how do you make time for internal work in your schedule?

Honestly by recognizing that the internal work isn’t going to get done unless you make time to do it. As a business owner, you’re responsible for making sure that there’s time to do that internal work. Set a time to do your internal work and don’t let anything interfere with that time.

Make A Financial Task List (6:14)

The biggest thing that’ll help you get your bookkeeping and internal work done is a tool I call a financial task list. A financial task list is a master list of everything financial that you need to do in your business. It is a checklist that you make one time and then every single time you’re doing something for your finances, you follow this list.

For example, you might have a weekly financial task list. These are all of the things that you need to do weekly. Then there are tasks that you’ll do on a monthly basis. So you have a monthly financial task list. And on and on it goes.

I know it can seem overwhelming to add ANOTHER thing to your already long list of things to do, but you really want to take the time to make a financial task list. It’s going to speed up your bookkeeping because, without a process to follow, you get distracted with all the things (I’m looking at you Facebook).

If you have a list that you can just pull out then you know where to start and can work your way down the list until all your finance tasks are done. AND you’ll build this process into a habit. Before you know it you’ll be doing your books on autopilot.

Make a Recurring Bookkeeping Appointment with Yourself (9:05)

Go ahead. Don’t be shy. Set a recurring appointment or coffee date on your calendar for you and your bookkeeping. Don’t just tell yourself you’re going to do your bookkeeping when you have time because guess what? You’ll never ever have time if you don’t make it.

Let’s be honest. Bookkeeping’s not a priority for us until we’re about to file our taxes. Instead of sticking your bookkeeping into your schedule on a whim, give your bookkeeping it’s own sacred time in your business. Sacred means you don’t give it up for anything. Not for a client meeting or because you feel like going to the spa that day (but do go to the spa the next day!).

I recommend having a recurring bookkeeping appointment with yourself every week. It just makes everything a lot faster and easier to keep up with. Remember. Once you do this for a couple of months it will become something that you just do on autopilot.

What methods do you use for managing your business finances?(11:14)

First of all- I strongly believe that you need to use the tools and processes that work best for you. Some of my processes may or may not resonate with you. So be really honest with yourself about what works for YOU.

If you don’t like a specific process, the way an app works, or the interface of a tool that I use or love, you’re not going to want to use it. Always take an assessment of what works best for you first.

With that said, these are the tools and processes that work best for me.

Daily Tasks (12:26)

The first thing I do daily is I go into QuickBooks Online, update my transactions that get downloaded from my bank, and categorize them. Since I do this daily, it’s usually only a few transactions. This is not super time-consuming. I just categorize, and I’m done!

If I’m working on a project that I bill for hourly, the next thing I do is enter my time into QuickBooks on an ongoing daily basis. Here’s an example.

When I’m done with the time I’ve allocated for a client project, I’ll go into QuickBooks and add my time to my time sheet and mark it billable to that client. When you turn off your timer document it as billable time right away so it’s not something that you have to come back to later.

The next thing I do is daily invoicing. If I am done with a project, I invoice my client as soon as I finish. Since all the time is tracked in QuickBooks, it pulls it automatically onto the invoice and then I just send the invoice to my client.

Weekly Tasks (15:08)

Every single week I look at my numbers and I look at my cash flow. I look at what I’ve been spending and what money I have coming in from open invoices. I look at what’s coming up for the month that I’ll need to pay for as well. I look at these items every week so that I’m aware of how much money I have coming in and going out.

Another weekly task is clean up. I make sure I didn’t miss categorizing income or expenses and take a moment to keep everything nice, clean, and organized. I do this on a weekly basis but you can also do this monthly. I find doing it weekly just makes things super easy to manage.

I also check for overdue invoices on a weekly basis. I usually do this daily when I know a big invoice is going to be overdue but sometimes I also do this check weekly. When I see those overdue invoices, I send out reminders to clients.

Next, I categorize my drives using Mile IQ. Mile IQ is an app that automatically detects when you’re driving and will then log the miles that you drove. It logs when you start and when you end. You then swipe left or swipe right to categorize each drive as business or personal. It’s like the Tinder for documenting your miles!

The last thing I do on a weekly basis is I process my hardcopy receipts. I keep all my hard copy receipts in a special place in my desk drawer and I take pictures of them. I document them into QuickBooks, categorize them, and then I throw them away.

End of Month Tasks (17:43)

On the last week of the month, I pay myself and do all the transfers I need to make into my personal bank accounts using my online banking transfer system.

Beginning of the Month Tasks (18:33)

The first thing I do at the beginning of the month is reconcile my bank accounts from the month before.

Next, I run and look at my Profit and Loss report from the previous month. I double check to see if there’s anything funky going on and I keep an eye on my spending categories.

Then, using my Profit & Loss report, I calculate my tax savings and transfer money into my tax savings account.

I also enter my home office, cell phone, and home internet expenses into my split expense tracking spreadsheet.

Now, I know it sounds like a lot but I keep up with things every day. I take one day, usually a Friday, and I tack on an extra 20 minutes to do beginning and end of month bookkeeping tasks.

What accounting software do you recommend? (24:46)

People ask me this question all the time and I think at this point most of you probably know the answer. I recommend QuickBooks Online. It’s what I use. It’s what I prefer. It’s what I think of as the best option for small business owners.

I put together a list of a few features that I think are really beneficial for small business owners. This list really serves as the why I choose QuickBooks over anything else on the market.

Bank Account Syncing (25:37)

This is the biggest reason I recommend QuickBooks Online to anyone! It syncs with your bank account and downloads your transactions for you. This is a total time saver. Instead of having to type a bunch of stuff in, the information comes into your program automatically and all you have to do is categorize it.

Some bookkeeping programs that are add-ons to systems like 17hats or Dubsado don’t actually sync with your bank account. Whatever you use, make sure that it syncs with your bank account and that your bank account is compatible with the software.

Chart of Accounts Customization (26:55)

Your chart of accounts is the backbone of your entire business finance system. It’s all of your income categories, expense categories, assets, and liabilities you have in your business.

Some programs don’t allow you to customize your chart of accounts. As your business grows, you will want a higher level tracking so you’ll want the ability to customize your chart of accounts.

Digital Invoicing (27:42)

Digital invoicing is something that I use personally in my business. It really makes the invoicing process fast and efficient. It’s also easier for the client as well.

With QuickBooks Online, I accept payments on my invoices through Intuit’s (the maker of QuickBooks) payment processor. All my client has to do is open up the invoice, click a pay now button in the e-mail, and it opens a payment window where the client can easily pay and go on about their day.

This is so much easier than getting clients to write and send a check. That takes forever! Using PayPal can seem like a hassle for most clients because they don’t like having to log into programs, so QuickBooks Online’s digital invoicing feature makes things like this so easy.

Billable Expenses (28:53)

No more trying to keep up with all of those billable or reimbursable expenses you have for your clients. QuickBooks Online has a feature called billable expenses. If you have a business where you buy items for your clients and then you bill them later, QuickBooks Online has a built-in feature where you check a box to label a transaction as a billable expense and assign it to a client.

When you go to make an invoice for that client, a window to notifies you that you have billable expenses for that client. It will then ask you if you want to add it to the invoice. You can make the decision to say no and wait a while or yes to add the charges.

Killer Reporting (29.39)

The reporting in QuickBooks Online is unparalleled. Seriously. You can make any report with QuickBooks Online. I have made the most random reports for people about the most random things and still, using QuickBooks Online, I’m able to do it.

Time Tracking (30:34)

With this feature, you can just track your time in QuickBooks and mark it as billable to a client. Marking you time as billable will cause the time to behave the same as reimbursable expenses mentioned before. When you go to create an invoice, you will see a pop up that gives you the option to add it to the invoice or wait a while.

The App (31:05)

The last feature I love about QuickBooks Online is that it has an app which means that you can invoice on the go. Say what?!

Yes, my friend and the list goes on! You can scan and take pictures of your receipts with the app so you can store them in QuickBooks. And you can categorize your transactions in the app too! You could actually do your books on your public transportation commute or while waiting at the doctor’s office.

How much should I pay myself, save, and spend on my business? (32:10)

Loaded question alert! Unfortunately, there is no one size fits all formula to answer this question but this is a question that I spend an entire module covering in my Bad Ass Business Finance course.

I don’t like giving a blanket answer to this question because what one person needs from their business could be completely different than what another person needs. We all have different needs in our business and we all have different goals.

Look at Your Business Holistically (33:59)

There are different parts that exist in our business but we have to look at our business holistically which means that you need to look at your business spending, saving, debt, and owner pay as a whole. There is a process of figuring out what to save, what to spend, and what to pay yourself.

We need to stop looking at our business in disjointed parts and start looking at everything together. The amount you spend is going to impact your owner pay. How much you pay yourself it’s going to impact your savings. How much you save is going to impact your debt pay off. All of these things move and work together and this is another reason why I can’t just tell you pay yourself a specific amount.

Remember. This is a process. You won’t figure it out overnight.

Sometimes you have to experiment with managing owner pay in your cash flow. You have to test things out. You can’t just throw something together and say this is how it’s going to be. Give yourself time and use a process to figure out the best numbers to pay yourself and what to spend. There’s some super special resources to help you with this process in the resource guide. Hint. Hint.

How and when do I file my taxes? (37:23)

This is a huge question to answer but let’s break it down into some basic information. My workshop Panic Free Tax Prep goes into detail about how to prep for your taxes.

Since that resource is available, I won’t go through all the tax prep steps but I do want to talk about some of the key dates and things that people should know to wrap their heads around their taxes.

When You Have to File Your Taxes (38:18)

You need to file your taxes when you have more than $400 in self-employed income. I know that is not a lot. If you have more than $400 in self-employed income you need to report that in your taxes on your Schedule C if you are a sole proprietor.

If you’re an S Corp or an LLC then you just need to report whatever you make. Whenever you start making self-employed or contractor income money, you want to start tracking your money in anticipation of filing your taxes immediately.

Important Dates (39:27)

Now, let’s talk about a few important dates we have around filing our taxes. Corporate returns including S Corp returns are due on March 15th. A lot of people don’t realize this when they become an S Corp. These returns are actually due a month earlier than personal returns so be sure that you are preparing for your taxes to be due on March 15th.

Everyone at this point knows that your personal returns are due on April 15th. Keep in mind if the 15th ever falls on the weekend, then the deadline actually gets moved up to the following Monday.

How to File Your Taxes (40:13)

Believe it or not, you have two options for filing your taxes. The first option is to hire a tax preparer. With this option, you gather all your materials,get everything your tax preparer needs from you, and they file your taxes on your behalf.

The second option is to DIY your taxes which is to use something like Turbo Tax that walks you through the tax filing process. I always recommend that you use the services of a tax preparer as soon as you can afford it. They are so worth your investment because they save you time and they are able to maximize your deductions which is going to save you money!

The cost of a tax preparer will pay for itself just by you not having to deal with all the logistical parts of things. Don’t even get me started on how it saves you from the headache of trying to figure things out on your own.

Prepping for Your Taxes (41:51)

Prepping for your taxes is a process in itself. So you need to give yourself, at the minimum, a week to prep for your taxes. It does not matter if you are using Turbo Tax or a tax preparer, there is prep work you need to do.

If you hire a bookkeeper, they will often help you with all of the logistical parts of prepping for your taxes. You still need to review that information and look it over because this is what’s getting filed with the IRS. You and your tax preparer are ultimately the two people that are liable for your taxes and what gets filed.

Give yourself 1-2 weeks to prep for your taxes and to double check the documentation prepared by the person or people you’ve hired to help you.

At what point should I think about switching to an S-Corp? (43:49)

S Corp’s are very sexy right now! Everyone’s curious about them and almost everyone wants to switch to an S corp.

S-Corp Benefits (44:27)

In an S-Corp you, as the owner of this corporation, get to pay yourself a reasonable salary as an employee. You actually get a paycheck. With an S-Corp, you get the benefits of the good old days where you got a paycheck as an employee with your tax withholdings already taken out. This is why so many people are excited about S-Corps- because a lot of new business owners wish they could just simply get a paycheck.

The benefits of getting this paycheck is that there are tax withholdings which cover your salary. If you’re strategic about it, you can opt to have additional withholdings that cover your taxable profit. Talk to a proper accountant who will crunch all of these numbers for you so you can actually set up your payroll with this strategy.

The other benefit is that your salary is considered a business expense. This comes off of your net income (aka profit).

With an S-Corp, you’re considered an employee of your business which means that you can do a 401(k) as an employee and have your corporation match it which is a business expense that lowers your tax liability. You could also run your health insurance through your corporation.

S-Corp Drawbacks (47:16)

The first drawback is that you have to run payroll which means your corporation pays payroll taxes. That means it is more expensive to be an S-Corp because you pay payroll fees and taxes. You have to pay the employer portion of the payroll taxes because again your business, which is its own entity, is now paying you as an employee.

S-Corps are harder to form than an LLC. There’s more set up involved which means it usually costs more to set up an S-Corp. Depending on your state, setting up an S-Corp is not a cheap option and it’s a lengthy process so you need to have the time and the financial resources to take that on.

There’s more paperwork to file. This could also be something that’s difficult for people who aren’t good at paperwork and you need to be able to run payroll for yourself. The IRS expects you to run payroll for yourself so you need to be able to do that on a regular basis.

When You Should Consider an S-Corp (48:26)

First and foremost, you need to have the cash flow to sustain a regular payroll for yourself which is considered reasonable compensation. You really do need to have a stable flow of cash coming into your business. If your business goes through a lot of ups and downs and you’re scraping by every month, you’re probably not ready for an S-Corp.

I’ve heard a lot of varying accounts about when to switch to an S-Corp. Some say you should switch when your net income is $45,000 and others say when you’re net income is $75,000.

There’s no straight answer to this question. If you’re netting more than $60,000 per year, start talking to your accountant about an S-Corp. That doesn’t mean you should absolutely switch, that means that you should talk to your tax person about if an S-Corp is the best fit for your business.

Now you know the answers to the top 6 questions I get asked about business finance and have more clarity around your money, check our my PDF guide (with links) to my favorite blog posts that answer your burning questions about money. Download your free resource guide below!