The entrepreneurial spirit is swift. People launch a business and worry about the details later. For many of those details, later never comes. Unfortunately, skipping foundational details to follow inspiration often ends in disaster. Like when financial organization is left behind in the dust.
You launched your business to make money. If you want financial success, you need a sturdy financial foundation. Here’s how to create that foundation in a few steps:
Create a system for tracking expenses
Without a strong financial tracking system, you can’t steer your business toward success. You won’t know when you’re approaching success, or when you’re about to fail. Worse, you won’t know if you’re already failing.
An effective financial system begins by defining a protocol for the way purchases are made, and includes a protocol for how financial information is documented, calculated, and filed. Your system should incorporate financial data that comes from multiple sources or teams, and creates a cohesive protocol that binds them all together.
Require purchase requests
For example, create a purchase request template that all team members must submit prior to making a purchase. This way, you can approve all purchases, clarify the item’s legitimacy, and put it in the budget. Some companies don’t require a request if the amount is less than $100. That may work for a small startup, but it’s not a good idea for a larger company where purchases are more frequent. If you have a small startup and plan to keep your employees while you grow, get them in the habit of making purchase requests now. It might be difficult to train them out of their freedom.
Require monthly expense reports from each team
Create standards for how expenses and income are documented and filed. For instance, send all receipts to one person to scan and save. Request an end-of-the-month expense report from each department detailing their purchases for the month and verify it against receipts turned in.
A system ensures expenses don’t slip through the cracks, and employees don’t take advantage of making unapproved purchases. When your bookkeeper needs a vacation, a system ensures your company won’t fall apart while they’re gone. You can hire a temp and teach them the system, or you can fill in for them.
Track expenses daily
To track expenses, you need to do more than track money in and money out at the end of the month. You need a projection of your daily expenses, income, and bank balance so that if you are going to be in the red fifteen days from now, you have enough time to find a solution.
You can use popular accounting software to track the details for your taxes, but consider that with a little training, you can produce an Excel spreadsheet with capabilities that exceed those programs. Excel is easy to program once you learn standard Visual Basic (VBA) formulas. It’s easy to learn VBA quickly with this masterclass from Spreadsheeto. The class gives you training you can apply immediately, and you get high-level support and feedback from a VBA professional.
Once you learn basic VBA, you can program an Excel spreadsheet to crunch your numbers exactly the way you want. You don’t need to hire a third-party programmer and hope they understand your specifications.
With basic VBA skills, you can program a spreadsheet to give you your daily expected available cash by documenting:
- Expected expenses and the date you expect to pay
- Expected income and the date you expect the funds to become available
Using simple formulas and some creative organization, you can turn the above information into a daily projection of your expected finances.
Tracking expenses daily will curb impulse spending, show you where money is being wasted, and create financial discipline in your life. As a side benefit, you’ll have a better handle on your taxes, and perhaps for the first time, you’ll get your taxes done early.
Don’t opt for the most glamorous option
There are plenty of shiny objects, but sometimes you don’t need the latest and greatest. For instance, if you’re buying your staff laptops, there’s no reason to buy them all brand new. Buying refurbished laptops will save you at least a couple hundred dollars per laptop, which is great when you’re an Apple fan. Multiply that savings by ten employees, and you’re saving a minimum of $2,000.
Don’t drop the ball
Regardless of how you organize your finances, don’t drop the ball. Stay on top of tracking and enforcing your policies. A system is only effective when it’s enforced.