Best Financial Habits for Your Business in the New Year
Even in the best of times, many people enjoy setting intentions and resolutions when a new year rolls around. And under challenging circumstances such as we’ve seen in 2020, looking forward to a fresh start can feel invigorating. If you’re ready for your business to start strong in the new year, this is the time to set the best financial habits in place.
Owning and running your own company requires diligence and persistence. But sometimes, it also requires outsourcing the pieces that don’t feed your soul. If bookkeeping is one of those things, let’s chat. The Fisher Bookkeeping team is happy to take this off your plate so that you can continue building your business.
Start the Year Strong
No matter where you are in your business, there are bound to be habits and practices that you can start or improve. And even when you don’t feel super comfortable with the money side of things, you can take steps to put your business on sound financial footing.
If you haven’t paid much attention to your financial systems and processes yet, it is not too late to start. Setting yourself up to control your money rather than worrying about it frees up significant brain bandwidth.
The new year is a perfect time to get practices in place that will keep your finances clear and organized moving forward. And this time next year, you will be so glad that you did.
Best Financial Habits for the New Year
If you’re ready to set up your business for a strong year, make sure you start and follow these six best practices.
1. Create a Business Plan
It may seem odd to tell established entrepreneurs to make a business plan. But the truth is that many people start their companies without ever completing this essential piece. And most never go back to create one. Without it, you could end up spinning your wheels and wasting money because you don’t have a clear path in front of you.
Your business plan does not need to be long and complicated, but you should have something in writing that guides your operations. If you aren’t sure how to get started, consider using a simple template.
Writing a formal plan sets a foundation for your business. It also places you in a position to apply for loans, grants, and venture capital when those opportunities arise.
If you have already completed your business plan, then the new year is the perfect time to set some goals for your company. Reflect on what went well the previous year and then stretch yourself to reach new heights.
2. Pay Yourself
Are you scrambling to find clients and fulfill orders? Are you always paying bills without having any money for yourself?
If so, you’re not alone. More than a quarter of business owners go more than six months without paying themselves anything. But it doesn’t have to be that way.
All work and no pay is a recipe for burnout, so make it a new year’s resolution to pay yourself something. One effective way to do this is to follow the Profit First system of bookkeeping. Setting aside money for your profit, taxes, and compensation is one of the best financial habits you can start.
Or you may be experiencing a surplus that you aren’t sure how to handle. The COVID-19 pandemic rocked the world at the beginning of 2020. Some businesses saw their revenue dry up overnight while others suddenly had more income than ever before.
Now that we are nearly a year into the pandemic, it’s time to make sure you are working within this new normal, as much as possible. You need to pay yourself whether your business is hanging on or booming.
3. Make a Plan to Eliminate Debt
Starting and building a company frequently involves borrowing money for start-up costs and capital. But the decision to take on debt needs to include a plan for paying it off. Currently, many business owners are also applying for PPP forgiveness.
Make sure you have reminders or auto-pay plans in place so that you do not miss a payment. Avoid maxing out credit cards as you invest in your company’s needs. If you need cash, consider applying for a small business loan through the SBA or your local credit union. They tend to offer better terms and interest rates to help you get out of debt more quickly.
Using the Profit First system will also put you on a direct path to being debt-free while protecting your profit. It allows you to cut expenses methodically and strategically so that you free up cash to pay off loans and credit card balances.
4. Don’t Ignore Your Bank Accounts and Monthly Reports
Successful entrepreneurs regularly check in with their money. They look at their accounts and balance sheets to check for errors or anything that seems out of line.
Schedule time to look over your business accounts and reports at least once a month, if not more frequently. Besides looking for errors, pay attention to charges for items you no longer use or need. Canceling unused services or subscriptions can save you a substantial amount of money.
Consistently looking at your Profit First accounts gives you confidence and assurance as you pay your bills and yourself. And going over the Profit & Loss and Balance Sheet each month gives you an overview of the company’s profitability. Don’t skip these steps.
5. Tell Your Dollars Where to Go
Your income should be working for you. Every dollar should have a job to do, but you have to tell your money what its job is. Setting your budget for the year is crucial. Even though you may have to adjust it as the months go on, you need to have a budget in place.
Make a plan for all the revenue that comes into your business and direct it to the right task, including:
- Profit
- Payroll
- Rent
- Owner Compensation
- Taxes
- Professional Services
As you build and maintain this system, you will be able to better understand your company’s financial well-being. And you will be able to approach your bank accounts with confidence because you are in charge of where the money goes and how it serves you and your business.
6. Consider Outsourcing Some of the Financial Pieces
Having financial systems in place saves you money. But it’s possible that you may end up spending too much of your valuable time keeping up with your business finances. You are your company’s most valuable employee, and your hours are best spent working on profitable endeavors.
Outsourcing your company’s books can be the best next step for you to take. It may feel counterintuitive to add an expense to your balance sheet by hiring a bookkeeper. But the reality is that it saves you money in the long run by reducing errors and freeing you to do income-producing activities.
You can’t outsource every job in your company to a highly-qualified professional. But bookkeeping is an area that is perfect for this. And even if you have an accounting department, an outside firm can help them level up by offering education and oversight. Getting your financial ducks in a row in the new year sets you up for growth and success.
Cheers to the New Year!
Regardless of how established your business is, the best financial habits are the ones you will follow consistently. And the tips on this list are a great starting point for building a healthy financial foundation.
The experts at Fisher Bookkeeping are here to help you and your company enjoy confidence in your finances this year and beyond. With full bookkeeping services and certified Profit First coaching, we can take a significant amount of work off your plate. Let’s connect today and see how we can serve you.
About the Author Barb Fisher
Barb is the CEO of Fisher Bookkeeping, an outsourced bookkeeping consultancy that provides small businesses with a full-service financial department. Her favorite aspect of work is to break down the accounting to meaningful bits, so entrepreneurs can make a powerful difference in their own business. She's also a power lifter (squat: 215, DL: 270).