1. Separate your business finances from your personal finances
When I first started my business, I didn’t understand why I needed to keep my business income and business expenses separate from my personal finances. Any income that I earned flowed into my personal checking account, and I paid for any business-related expenses that I had with my personal credit card.
Luckily, my CPA quickly helped me understand why my business finances should be kept separate, and steered me in the right direction with this great piece of advice: “By the end of the year, your income will have increased so rapidly that you will wish you’d set up these systems from the beginning.” I wasn’t earning much money from my “side hustle” at the time, but by the end of the year I realized that he was so right! By the end of that calendar year I was earning a lot more money from my business, and it was so much easier for me when tax time rolled around because I’d made a clear separation between my business and personal finances from the beginning.
The two accounts I used to do this were a business bank account and a business credit card. All business income flowed into the bank account, and I paid all business expenses with the credit card. Simple, right?
2. Learn how to track your business income and expenses
According to QuickBooks’s Women’s History Month report, only 57% of women entrepreneurs leverage finance and accounting software to help them with their business. Once I increased my income, I quickly realized how unsustainable it was to manually track all of my business income and expenses.
I started using QuickBooks to manage my business cash flow very early on in my entrepreneurship journey, and it made tracking my finances so much easier. Step 1 became even more important then, because all I had to do was link my business bank account and business credit card to my QuickBooks account, and I knew that all transactions recorded would be related to my business. I then set a once-a--month reminder to go into my QuickBooks account and categorize my transactions to make sure my books are up to date.
3. Organize all of your business and tax documents in one place
Taxes were incredibly daunting to me as a new entrepreneur. I needed to learn how to pay quarterly estimated taxes, deduct business expenses, and keep track of all of the 1099s I’d need to collect at the end of the year.
From day one, make sure to organize any documents that you get for your business into either a physical folder in your office or a digital folder on your computer. I kept things like my EIN confirmation letter, LLC information, W9, and more in my own folder to stay organized.
Be sure to also write down processes for the important items—how to pay your taxes, what websites to go to, etc.—so that when tax time does come around, you don’t have to reinvent the wheel.
With QuickBooks all I have to do is give my CPA access to my portal, and like that they are up to date with my business information!
Becoming a woman entrepreneur was daunting for me for a lot of reasons, but more women than ever are starting businesses today (in fact, QuickBooks also found that 62% of active women entrepreneurs in the US have started their businesses in the last few years!), so I felt really empowered to learn what I needed to know to set my business up for success.
Taking the time to learn about business finances and setting up solid financial systems early on—before you’ve reached a point where you want to grow and scale—will save you a lot of time and headaches later on. It will also help you grow and scale your business a lot more quickly—so it’s time you start treating your “side hustle” as a business, and not the other way around.
Thank you for taking the time to read this installment of the QuickBooks Ask The Expert series, and happy Women’s History Month!
