5 Easy Ways to Know Your Numbers

If you’ve ever watched the show Shark Tank, you know that all of the investors flip out when the entrepreneurs pitching to them don’t know their numbers. It took me a few years into entrepreneurship to understand the gravity of those moments because, as my favorite entrepreneurship professor would always say, cash is king. While I am by no means perfect at this, I do make it a habit to be consistently in the numbers of all my businesses and my own personal budget, so that I have an understanding of where my money is coming from and going. Because this is an area that absolutely terrifies most entrepreneurs, I’m going to give you my top tips to make this whole process a little bit simpler!

1. Avoiding your money does not make you money

This is probably the most important thing I want to get across in this post. Not knowing your numbers because it sounds hard and stressful is only wasting you money. You have no idea the amount of tax write offs you’re missing, expenses that you didn’t consider, and ways to optimize your business that you could catch if you’d only get down and dirty with your bank account. Allowing bills to leave your account via auto pay and putting things on a credit card isn’t bad if you’re on top of what’s happening, but if you simply check the bank account to make sure money is there and move along with your day, you’re missing so much. You don’t really know what you’re making and what you could be making and saving if you avoid it. Quickbooks online is my absolute favorite platform to use; it syncs with your bank account(s), and I can share it with my accountant easily during tax season to pull all necessary reports.

2. Have a money day

Monday is my money day. Every single week. I update Quickbooks for both of my businesses and do our personal budget. It is so simple, and I weirdly look forward to it! I’m not saying that you need to do your numbers every week (though I would recommend it), but at a minimum, every month. If you leave it all to tax season, it will be insanely stressful, and again, you’ll miss so many opportunities. How can you compare month over month or year over year if you only look at your books once a year?! You can’t. You need to be able to project your income, see when growth and loss happens, and actually know what a normal baseline and breakeven is for you.

3. Don’t mix work and play

This seems so obvious, but we have all done it, and some do it all the time (danger). Owning a business has it’s perks when it comes to expensing things, but you can’t expense your life to your business. You also cannot get in the habit of putting business expenses on your personal card. If that happens, you will probably tell yourself you’ll remember and fix it later, but if you don’t have a good bookkeeping habit set into place, you won’t! And things get messy. You need to have your own business checking account, savings account, and credit card, that doesn’t ever mess with your personal account. When you pay yourself, there should be a payroll system or owner draw in place that keeps you from just using the wrong card.

4. The leftovers aren’t your salary

When you know your numbers, you know what your actual profit is - the money left over after all of your expenses are paid. Many business owners fall into the trap of taking all the leftover money as their salary, which is not ideal for so many reasons. First of all, if you’re an LLC or sole proprietorship, you have to realize that you pay taxes on your entire profit, no matter how much of it you take for yourself. So, it’s crucial to set aside the proper amount for taxes throughout the year. You need money in your operating account for low months, emergencies, taxes, equipment purchases, new hires, and just plain savings! What’s left in the account after bills are paid is not money you should be living off of. It’s money that needs to be understood and set aside, so that your draw/salary is appropriate for your business and doesn’t strangle it.

5. Train and outsourcE

I’m not an accountant, and if you’re reading this, I’m guessing you aren’t either. You are not required to know everything about every area of your work, and I truly do understand that money can be messy and stressful. I have an accountant who I pay a lot of money to do my taxes because she’s amazing and I trust her. But, being knowledgeable about my own books allows me to save time and money because I’m organized and ready to deliver the reports and metrics she needs. So, there’s a balance between learning as much as you can and outsourcing what needs to go to a professional in this department. If you have people on your team that are trustworthy and can help in this arena, that is another amazing way to take the load off of you, just make sure you have consistent conversations about the budget, so that all is clear.

I hope this was helpful and a step in the right direction for those of you who are aiming to increase your financial literacy in your business! Need more help? Check out my business consulting page.