Monthly Archives: November 2016

There’s money in the bank, so I must be doing well!

Step 4: Reconciling the accounts

Congratulations! You’re on top of all of the steps. You log in to your bank account and there’s plenty of money. You do a happy dance and congratulate yourself – I’m killin’ it! – Not so fast….

Have all the checks been cashed? Did your deposits clear? What? You don’t know? Without that knowledge, you really don’t know what money is left over. And that’s when checks start bouncing. And your vendors get angry. And your credit score goes down.

The accounts need to be reconciled every month. Every. Month. Credit card statements, too.

Reviewing what went out is a pretty simple process:

1. Pay attention to what checks weren’t cashed yet – if it’s been more than a couple of weeks, contact the payee and make sure they received it. If they didn’t, stop the missing check and issue a new one. If they did, ask them to deposit it. More than 90 days have passed after the date of the check? Some banks will consider it “stale” and won’t cash it.

2. Are all the credit card charges and withdrawals from the bank account accurate? If you never look at your statements carefully, I’ll bet you there are incorrect or double charges. Happens all the time. Don’t give your money away!! You work too hard for it!

These are just the basics of tracking your numbers. Having a system established will put you on the right path to making knowledgeable decisions about the future – for your business and for your life.

Need some guidance? Let’s talk about your money management needs. Schedule your free appointment below. Stop struggling and make 2017 an easier year!

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Now where do I put all of this stuff?

Step 3: Organizing the data

Now that you are using your bank accounts properly, and tracking your income and expenses, and receiving all kinds of statements – what do you do with it all? How are you tracking your new banking info? Shoeboxes full of receipts and statements, envelopes, spreadsheets, notebooks – anything is better than nothing. As long as it makes sense to you. Ideally, you’ll be using software meant for money management. QuickBooks is the most popular – there’s also Xero – both online choices. Why is this better than your handwritten list? Or your elaborate spreadsheet that is easy to follow?

Let me tell you a story…

A business owner contacted me recently. Her business is doing really well; she runs it herself and has control over everything. But she had no “books” – nothing to show a bank for a loan, which is what her financial advisor told her was necessary to get to the next level in her business. I established her books online with relative ease, as she was incredibly organized.

Unexpectedly, she was presented with the opportunity to participate in a MBA program – a spot had opened up and she had 48 hours to submit her paperwork, including formal financial reports. She contacted me in a panic, thinking that this wasn’t enough time. I assured her that all I had to do was run the reports and email them to her. She had everything she needed that day, and was accepted into the program.

If she only had spreadsheets, she would have missed out on that opportunity. So I ask you, what opportunities might you miss out on because you don’t have this part of the business under control?

Next week: How much money is REALLY in the bank account?


When Dunkin’ Donuts isn’t a business expense

Step 2: Break out personal and business expenses

In the previous post, I made the point about the importance of separating funds with business and personal accounts. Now that you’ve done that, you should be categorizing your expenses. But there is often confusion or misinterpretation about what are “business expenses”. Let’s play a quick game of True or False:

True or False? On the way to a client meeting, you stop for breakfast at Dunkin’ Donuts. Business Expense? How about if you buy breakfast for the client also?

True or False? The fee for attending a networking event. And the parking. And the new outfit and shoes you bought for the event.

Did you choose F, T, T, T, F?

Tricky, right? Here’s the general rule – a deductible expense is one that is required for the operation of your business, and is considered both ordinary and necessary. Rent, office supplies, printing business cards, website design, networking events – you get the idea – that’s just a few. Here’s what not considered a business expense:
New clothes – unless you have to purchase a uniform for work that is ONLY worn for that job
Coffee, lunch, pizza, etc. when you’re out and about, even if you are in transit to a meeting with a client.
New tires for your car – unless the car is owned by the business and is only used for business reasons.

What about meals? If you are traveling for business – to a conference, for example, yes – they’re categorized as travel meals. Bought lunch for the office? Maybe but probably not a true expense. Bought dinner for the office because everyone stayed late to finish a project? Yes, business expense. Took a client to lunch? Yes – but make sure to keep the receipt and write the name of the client on it. It should also match a date in your calendar for that lunch meeting.

Speaking of receipts – keep them! Yes, all of them! Scan them and keep digital copies if you don’t want the clutter. There are a number of mobile apps that let you take a photo and store it right away.

Sorting through this topic can be overwhelming. Here’s a link to the IRS guidelines for business expenses to give you some more guidance:

So now that you’re keeping business and personal funds and expenses separate, how do you track the information? Where does it all go?

Next time, Now where do I put all of this stuff?