COMMON SENSE TIPS TO GET A JUMP ON YOUR MONEY THIS YEAR

I had my books closed this year...on January 1st. That's huge for me. I know, I know...I'm a bookkeeper and I should be able to get them done pretty quickly, but there is almost always a thing to research or pin down that pulls me further into the new year than I'd like. All I have left are my taxes, 1099s and payroll filings, and I'm headfirst into 2018! Woooo!

If you are staring into your coffee thinking, "Fat chance I could do that," it is possible to not be one of the stressed souls filing extensions and desperately trying to get their return in on time. Also, keep in mind that life is about preparation, not reacting to emergencies, and I'm listing out some great tips to help you get 2018 started on the right foot, and 2017 zipped up as quick as possible. Also, my business compared to yours could be incredibly tiny, so perspective is everything. :-)

1. Save your money by setting some ground rules for how you will manage your money this year. A huge antagonist in this effort is "Shiny Object Syndrome" and I am just as guilty of this as the next person. (Note: I used to think I was completely original in this term, but I'm not, and there is a ton written on it! You can read more about this by doing a quick Google search. I really like this piece by Entrepreneur.)

It's a Wednesday morning, you are zipping around on the internet and wow, that business tool looks amazing. Let's buy it. HALT! Does it meet the following criteria?

Is it proven to either boost sales, save money, or increase productivity? I.E. does it pay for itself? There is no room for rationalization here. If you fall prey to SOS and the previous statement is not met, you've just spent money you didn't have to. Set a time (or times) of the year during slow season, or when where you set aside time to really analyze purchases and new processes. 

Software purchases make sense if they eliminate manual ways of operating your business, decrease risk of error, streamline collaboration, and so forth. While you should never rely on your personal memory to track things long term (yeah, never ever works), pause before jumping into the newest software add on or suite. 

Material purchases are just as bad at stealing away small bits of cash without you knowing. Yes, that shiny new desk looks great, but would it make more sense to wait until your budget for the year is met? Do you really need it? No, the "but I need a deduction" is not a great argument to me in a lot of cases. Yes, you get the deduction, but you also just spent money you really didn't need to, and your piece of that dollar is gone as well. It may be an oldie, but a dollar saved is a dollar earned (thanks, Dad), and that didn't change when you became a business owner.

Be a steward, and don't make it your goal to spend every dollar possible. Most of the time it won't build your business faster, and you will be left less your expense. Sleep on it. You know that funny ROI term everyone likes to throw around? There is something to that....even on a micro scale.

2. Don't mix business and personal funds. NO. Don't do it. Zip it. No. Not only are you making things realllly muddy, but if you have a bookkeeper then the costs of keeping your books is going to be higher than if you didn't mix.

If you spend personal money on business items, use an expense report, just like an employee. If you want to buy something personal, make sure you have a draw schedule for yourself, and at the minimum transfer a draw to your personal account before making expenses. Your bookkeeper, and your bank account will thank you.

3. Plan for taxes. Make sure you put away a little bit more than expected into a tax fund. I hate unexpected cost, so being able to budget my expenses a bit at a time falls into that preparation idea. Talk to your tax planner about how much to expect. A general rule of thumb is around 30-33%, but could be more or less. Plus, you can make that money work for you while you wait for the tax bill.

4. Make a Budget (AKA Bring on Planning Week). No, budgets are not just for corporations slaving away at 11 pm on a Friday trying to get final reports done. They help you, too. Remember point #1?

Most versions of QuickBooks have a budget tool. The month before your fiscal year starts I like to designate a slow week as Planning Week, and I create a Master Budget. You can, too. Set out your expectations for the following year, and take the time to review all the shiny objects or new project ideas. I keep a Google Drive folder with mine, so I know they aren't forgotten. Figure out which ones make sense with the workflows, software, and company you have, and adjust your budget accordingly. Make sure you take into account that large purchases, such as capital expenditures, may not be able to be expensed in the first year...IE that money might be taxable.

Yes, things happen, and you can either adjust the Master Budget, or create a secondary budget or a forecast as the year goes on. The point is that you are taking strategic you's thoughts and putting them to paper before the year begins. While you are at it, put "insurance review" and "expense review" on the to do list. This is when you want to reconnect with vendors, using data, and improve the terms, get costs down, and argue those extra charges. 

The idea is that when you get to planning your budget the following year you have had the gift of time to see if your previous ideas "stick", and can then make an informed decision, placing these ideas into the next year's budget.

5. Keep Things Simple. I'm of the belief that slow growth is smart growth. That runs counter to the startup mentality, and fast growth is something that is best left to those with the mental strength and ability to manage the erratic behavior of a fast growth startup. While a lot of companies throw "Startup" as a specialization on their pages, handling this animal requires a lot of structuring, a lot of patience, and a lot of cash. It's not for everyone, so I'm focusing on the rest of us.

For many other businesses, including us, who may be near or at the end of the "startup" phase, keep it simple. Simple income, simple expenses. Easy to focus on. KISS. Plus, your bookkeeping cost will be low, so your accountant has more time to be a hero in other areas, such as calculating that ROI figure for you. ;-)

6. If your money is sitting, make sure it is working for you. You know what makes me want to cry? Money sitting in a bank account (or some savings accounts) that earn less interest than the bank is charging you in maintenance fees. Don't think because the account says "Savings" or "Interest Bearing" that it is working for you. Consult with a financial planner, and learn about ways to make all that savings we are building work for you. You create passive income, which can be a buffer if your primary business has a rough month. 

If the bank charge on your "Savings" account is more than the fee they are charging to manage it, close it. Shop around, and find a better bank, or investment vehicles that can help. If you are carrying forward debt, this is a great use of the extra savings you generate, after you have an emergency "buffer" in place.

The principles I use to manage my business are below, and are limited to the business (but can apply to your personal, as well):

1. Keep an emergency fund for your business, with 2-3 months of expenses. 

2. Once you have an emergency fund, pay off any debt (excited to call us a debt free business, but we weren't always!). Go from highest to lowest interest, but if you see "low hanging fruit" that is easy to pay off with one go, do it. Sidenote: I know a lot of personal planners recommend leaving credit open so that your score stays higher, but if you don't plan to use a credit card, I would consider closing it, given the current state of financial hacking that goes on. Your score may take a temporary hit, but it will bounce back quickly, and that hit to me is preferred to finding out someone just went on a spree at Nordstrom's with my credit. If you don't plan to use it again, close it. I'm an advocate of the one credit card method for travel and emergency purposes (well, one for business and one for personal), and otherwise, don't have them (oh, and shop those rates and benefits yearly, too!).

3. Once debt is paid off and you have a cushion, it's time to invest, with the guidance of a good financial planner or investment advisor. Make sure you build up a mix of liquid (easy to cash out), and long term investments. I love this part...it's like shopping, and when done smartly, you make more money instead of losing it. Your investments don't need to just be financial, however. Education counts, too, as long as you will make a return on it.

Please note that I'm a business owner, QuickBooks Advanced Certified ProAdvisor, writer, and accountant, and the above should not be construed as business advice specific to your situation. Always discuss with your advisor, accountant, or planner, and feel free to tell me I'm an idiot, or that you like what I have to say via kbunschoten [at] khboffice.com.