On the last Saturday of June, I taught a class, "Accounting for Creatives," hosted by WELD. It was my first time to get up in front of a group of people and teach. I was nervous at first but it was a fabulous experience.
Over the past ten years, I have worked as a corporate accountant and now I keep the books for my own business. I have filtered through a lot of information via tons of trial and error. For this class, my goal was share what I've found works well for me in hopes of saving my students some time and trouble.
Here are few ideas that I shared with the class.
Get your personal finances in shape.
In order to run your business well, your personal finances have to run optimally. This is my personal belief and I stand by it - good habits in your personal finances will go a long way in your business finances. Starting out, have an idea of how much income you need to live on and keep track of what you're spending. One tool that we use and highly recommend is YNAB (You Need a Budget). It's one of the best investments we've made.
Name every dollar.
Once you know what you're spending and the income you need to live on, name every dollar - budget your expenses. Whenever I say the word, “budget," I often get defeated looks from people. No one likes to do this. Trust me, I don't either. But you can't be successful without a plan. Dave Ramsey said this perfectly: "Give every dollar a name (job)." When you give every dollar a job, you will find freedom to spend within your budget instead of second guessing whether or not you can afford to eat out with a friend or buy those new shoes.
One of the most important changes we had to make was to stop being reactive. Here is how we used to do things: we kept our books and tracked our income and expenses. However, all of it was in vain because we were not planning for or anticipating future (expected or unexpected) expenses. If there had ever been large unexpected expenses, the business could have easily tanked and we wouldn’t have seen it coming. Now, we plan for future expenses and this helps us think about the future of our business. Being proactive creates freedom for the business to grow exponentially. Thank you to Jesse @ YNAB for sharing this knowledge.
Separate business and personal finances.
Even if your business is running as a sole proprietorship, you should have at least one personal checking and one business checking. Running your business with one bank account will be a tax and audit nightmare. I can assure you that IRS would prefer to see two separate accounts. Plus, it's so much easier on yourself to separate the two accounts.
Not everyone will agree with this, but there is so much joy in being giving. The more we grow, the more opportunities we have to give to other people. If your goal is to just become rich, I challenge you to look deep in your heart to see if that will really satisfy you.
The feedback from the class was so positive that we are offering the class once again in the near future. Also, we are planning to offer a 6-week course on peronal/business finances. If you want more info about either or both, feel free to put your name and email below. We will connect you.