#13: ORGANIZATION IS THE BASE OF YOUR FINANCIAL FOUNDATION

In this episode of Financially Adjusted, I dive into the importance of getting your financial house in order for your small business. I'll provide practical steps and tools for setting up electronic and paper filing systems, managing passwords, tracking financial data, and using accounting software. I’ll get into the benefits of staying organized, including easier collaboration with professional and smoother operations. Be sure to grab the free pdf guide that goes along with today’s episode, “The Entrepreneur’s Guide to Financial Organization” with the link below. 

Downloadable free pdf guide:
https://www.financiallyadjusted.com/financialorganization

 Last Pass:
https://www.lastpass.com/?utm_source=google&utm_medium=cpc&utm_campaign=19546987156&utm_term=lastpas...

MONDAY.COM:
https://try.monday.com/ngihpvgdh7xo

 DocScan app link:
https://itunes.apple.com/app/id453312964?mt=8

Dropbox:
https://www.dropbox.com/referrals/AACEgoCcNhTQsFR-M452g7A3OCCUTNxNrsM?src=app9-1

Recommended payroll software (affiliate link):
ADP:
http://accountantprogram.adp.com/accept/?EID=5453c160-167e-4c6b-aedc-893d78fb3f87&type=ShareUrl

GUSTO (affiliate link):
https://gusto.com/r/leslie4559

QuickBooks Online is my go-to accounting software. Get the best discount possible (30% off for 12 months) when you buy with my affiliate link below, through Complete Business Group. Message me at support@financiallyadjusted.com with any questions regarding signing up.
https://completebusinessgroup.com/leading-ledger-bookkeeping-llc/

My favorite budgeting app w/ an amazing free version: https://www.ramseysolutions.com/ramseyplus/everydollar

Disclaimer: This content is for educational and informational purposes only. Please consult with an accounting professional for direct advice based on your specific business situation.

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Disclaimer: This content is for educational and informational purposes only. Please consult with an accounting professional for direct advice based on your specific business situation.

Transcript

Hey friend! Thanks so much for tuning in with me today For Financially Adjusted. If you don't know me yet, I'm Leslie, your host. Or hostess I guess I could say. I’m here to help you get your financial house in order when it comes to your small business. I'll eventually also be touching on personal financial topics down the road, but my first goal is to bring you foundational financial knowledge, tips, and actionable steps when it comes to small business finances. As I'm recording this episode it's the beginning of June and it probably won't launch until the beginning of August because I like to stay about two months ahead with my content, so I don't feel so overwhelmed.

My husband Ken and I are currently working on replacing the fence in our backyard. Thankfully we don't have to put posts in which require a lot more work. It's a wooden fence and the panels need replaced in a major way. We had been meaning to get to it for quite a few years, but time was always a factor and it just seemed like a scary project to me for some reason. I'm not particularly handy but I'm always willing to learn and work hard.

My husband is definitely handier than me though so when he mentioned that we are capable of replacing it by ourselves, I trusted him on this.

this weekend was probably the third session of us working on it and I think it went smoother and better all-around than the first few times we worked on it. When I really think about it, it's because we put a system in place for how we wanted to have things go in the project, and we worked out the kinks and got organized. I think with anything in life if you haven't done something before or it's not necessarily your zone of genius, It can feel very confusing and like a much bigger deal than it actually is. If my husband wasn't there to guide me, I likely wouldn't have tackled this project but because he laid out the steps and encouraged me, I figured I'd give it a shot. I'm so glad I did because it's been kind of empowering to do this ourselves and I feel confident now that I could take on some other house projects in the sure that I've been avoiding. Anyways this experience got me thinking that it's likely a similar feeling most business owners have when it comes to their small business finances. I think many entrepreneurs avoid their finances and don't manage them well simply because they think they aren't capable, or they think it's more complicated than it really is. But many entrepreneurs simply haven't been exposed to financial education when it comes to running a business and it’s simply new. Let me tell you that you are absolutely capable of managing the money in your business and I'd like to help guide you. It's amazing what you can accomplish and learn when you have simple steps laid out for you and you get organized. When it comes to anything in life a lack of organization usually leads to a feeling of lack of control and a lack of clarity. This definitely rings true when it comes to personal and business finances. Well today's episode is all about the different ways getting organized with your finance can help you in your business and bring you more peace in your life.

I've also put together a guide for you to download after this episode and use moving forward so that you have something to walk you through taking these actionable steps towards organization in your business. I'll get into the how and also the why for each organizational suggestion. But let's just get right into it.

First, we're gonna talk about an electronic filing system. And this is going to be anywhere that you might save electronic documents. Maybe you already pay for a system like Dropbox, or something else or you just use your Google Drive. Or you have some cloud based system that you pay for but I particularly like Dropbox because I feel like it's pretty affordable and pretty user friendly on my phone and my computer. But when you're setting up an electronic filing  system, the thing to keep in mind is when I'm looking for these documents, where am I logically going to gravitate towards like what folder can I set up that I'll say oh this is obvious where this is? And I'll give you suggestions of course, and they'll be more elaborate in the guide PDF handout  that you can get download at the end of this. But, mainly you're gonna focus on organizational and filing, as a way to easily find things So you don't want this to be confusing You want to lay it out so that you save things in the same place each time. So, some suggestions on the different bigger broader categories file under would be receipts, tax documents, formation documents, or you know the documents you got for your company startup, but I just like to label this formation documents. And this is going to be like the documents you got from your state, from the US like your EIN, which is your federal tax number that you get for your business, and pretty much just any document that you get sent when you formed your business. You want to make sure you put that in a secure place electronically and then also paper storage we'll talk about that later. And then some other broader categories are bank statements credit card statements, loan documents, financial reports, like, that would be your P and L and your balance sheet month, employee files, payroll documents. You get the gist.

So, these bigger, broader categories are going to be there and you're gonna set them up in a logical way so that you can easily find your documents in these places and then you're also going to have subcategories under them. And these subcategories are gonna be for the year and the month or the quarter. You can get as granular as you want with these, but I do suggest definitely setting them up for years so that you don't have to comb through a whole bunch of different documents to even find the year that you're looking for.

I personally like years, I like months, and it depends on what it is sometimes. I do quarters so for financial reports, I do it by quarter…but for like receipts and invoices, I will do it by month. And then tax documents, that is gonna be annually because you're really only putting together for your tax professional annually and then for payroll reports things like that, I would use quarterly as well. So just really use your discretion and really, it's a perfect personal preference so when you're going back to these, you can find them. The idea behind that is to make it easy on yourself.

So, the next thing we're gonna talk about is your paper filing system and this is gonna set up in a very similar way to your electronic filing system. You're going to have a filing cabinet. Preferably one that's separate for business than personal. That way you're not having to comb through a bunch of different files that are personal just to get you to your business stuff.

So have a separate filing cabinet for your business and then have those bigger broader categories labeled on your folders. Like you'll have those file folders that are ..they have like the tab that sticks up and I don't know exactly what they're called offhand but you know what I mean? And you'll use those broader categories to label those paper folders and then you can have Manila folders that go inside of those two before the year or month or the quarter. And that way, you can easily find all of your paper documents, and it's not this huge cluster of papers there that you have to shuffle through. I actually think it's a little harder do that when you have paper documents saved. And they're not more granular than your electronic filing system. So, you're gonna set this up in a similar way as far as the categories go. And one thing I do recommend doing is If you have paper receipts, you easily can use a bookkeeping software like QuickBooks online on your phone to snap receipts and there's all  kinds of other different apps on your phone that you can do this with I think even iPhone you can just take a picture of it and save it that way or turn it into a PDF. But I do this with documents and receipts a lot of the time. Maybe not receipts so much, but with important documents, I will take the paper copy of it and if I have an electronic copy of it I will actually scan the document and turn it into an electronic format. Because you know papers get ripped and they get lost, and I think it's just a lot safer if you have an electronic copy as well.

Now you don't have to do this for electronic stuff If you're you know using a cloud based storage system like Dropbox, you don't have to print out your documents and also save a paper copy but, um I do recommend with paper copy of things to change it to electronic because it's a lot easier for something to happen to a paper copy of something. But I use what's called Docscan. It's an app on my phone and it's free and it's super easy to use I just take a picture of the document you know format it, make sure you’re capturing the document cleanly and then I turn it into a PDF and email it to myself and save it directly from there. However you wanna do that it's really easy to use. And again that's called DocScan so you can get that one when I'm sure there's lots of others that work really well too. Something else to mention when it comes to organizing tax documents taking a Manila folder and writing tax documents on it and the year. This is going to give you one central location for all of your tax documents that you will have to take into your tax professional each year. So, it's easier if throughout the year you gather up those documents that you know your tax professional is going to be asking you for and you put them in this folder. You can even have one that's separate for personal, separate for business. If you are a sole proprietor, you're gonna be just filing a Schedule C, along with your 1040 which is your tax document for personal taxes. And so you can lump them all together and it's not as big of a deal but if you're S corporation or C corporation, it's probably best to keep those separate and a one folder for business and one folder for personal. But rather than scrambling to find all the docs at the end of the year. It's going to be seamless if you just save them in this folder throughout the year. Also, in  an electronic folder.

Whether you're sending them electronically to your tax pro or you're meeting physically with them and you have papers you're gonna give them physically. You have it all in one place. And tax time comes it's just one less thing that you have to worry about…in what most consider a stressful time. 

And the next thing we're going to talk about is having a password manager. This is going to be a really great way to manage your passwords and then a safe way to manage passwords. Down the road I'm going to talk a little bit more about security when it comes to your finances and keeping yourself protected but this is one element of that that will help greatly. I used LastPass, and I know there's tons of other ones that you can use.

You can even use the Google one that's provided if you if you have Google Workspace. That works really well. But the idea is to be able to create complex password, which they suggest in these systems and you can save them all in one place. Rather than having your passwords written out on post it notes or other pieces of paper or…saved electronically where it's unsafe. If you do save your passwords electronically like in a spreadsheet or somewhere like that, make sure you password protect that because you do not want to get hacked and then have all of your passwords sitting there ready to be…looked at and used, but a password manager like LastPass will make things easy on you. And it will be a lot more secure. So do yourself a favor and use this as a central organizational system for all of your passwords. You really then only have to just remember that one master password to get into your password managing system. Rather than remembering your password for this or for that, and then you can set up more complex passwords and different ones for each thing that you log into so that you're safer. I think a lot of people so that they don't have to remember a bunch of different passwords and keep track of them, they just use the same one. You don't wanna do that. That's not safe. In today's day and age I pack and all kinds of crazy stuff happening out there You wanna make sure and you're protecting your financial information. So, I highly suggest getting a password manager…that you can use It'll make your life easy You can use it your phone on your computer and you will thank yourself later.

Okay, The next thing we're going to discuss is tracking financial data, and this involves a few different things that I'll touch on…and one, of course, is budgeting because you know I like to talk about budgeting if you've been following me at all. And, I of course recommend every dollar which is Ramsey Solutions. It's free and there's an awesome app for your phone. You can also use it on your browser. I've talked about that a lot already in my other episodes, so I won't get into that here But know that budgeting is a form of organization for your business.

You are…using that as a…proactive and projection tool so that can look forward versus looking in the rearview mirror. And this doesn't have to be super tedious or granular if you don't want it to be. You can put lump sum categories in there for your projections for revenue and expenses so that you can plan ahead for additional expenses or anything you're saving for, or you know how much you're paying yourself doesn't have to be a tedious thing It's just a central location for you to organize what's going on in your business financially each month that you can project out versus other things in your business like your bookkeeping software or your bank statements things that are happening and you're looking in the rearview mirror at like what happened in the past. This is a tool to organize your financial data in a realistic way that you can look at moving forward in your business. So, if you haven't started a budget yet definitely think about doing that and you can go back and check out, I think it's my second episode all about budgeting and then I have tutorial on YouTube So that will kind of guide you through doing that.

Many people cringe when it comes to budgeting. But if you think of it simply as just a money plan versus a limitation…or something that's total pain in the butt It can be a game changer for gaining control your finances both personally and professionally…Rather than just wondering..”Oh wait what's gonna happen this month” or “I wonder if I'll be able to have some money left over”. This way you'll just know, and you'll have a central location you can go to and that have that guidance throughout the month. 

The next thing I'm going to talk about is organizing financial data and spreadsheets. So, with spreadsheets I do this myself and I recommend other business owners do this as well. You can use spreadsheets as sort of your master list for revenue expenses, a bird's eye view of your budget each month, tax estimates based on your net profit. Take one spreadsheet… let's say you're using excel. You would create different tabs. One tab might be a master list of clients and the revenue that you bring in from each client. Another tab might expenses, and you're listing out on this one. All of your monthly expenses that are recurring, your annual expense, quarterly expenses that are recurring, and you're going to be listing out the details of that like, what's your payment method what's the amount, who is it to… This will make it easy for you to budget and then also have this place you can go to analyze your expenses and really figure out “am I getting an ROI on this?” “Why am I still paying this subscription when I'm not even using it?” And you can use your P and L for that as well but this is going to  kind of that master list because your P and L can change from month to month. But this is a master list that's showing you when everything's coming and you know if it's like an annual bill that you're paying for it can also be used as a way to break down how much you need to save monthly for each of those annual bills. I do the annual payments for subscriptions a lot because it tends to be a lot cheaper to do that you save sometimes like ten to twenty percent. But  a lot of times in the past I've forgotten that I pay for something annually I won't have remembered that I have that bill coming up and then it's not a surprise. You know it's there. So this is a great place to kind of keep track of that and calculate how much you need to save every month so that you always have enough money set aside for your annual bills that are coming. So that way no surprises. And then this can just be a very bird's eye, zoomed out view of your budget also. Just so you know you have a place to start for actually creating your budget. 

So, another thing I do with the spreadsheets for financial organization is I will have a separate also to track my tax estimates. Your tax professional might give you estimated payments that you should pay in each quarter in your business. Based on what you had paid the prior year what your income was the prior year and if you typically just take that and that's what you send into the IRS and to your state, that's totally fine. Sometimes I like to have more data that's real and real time and then pay in more realistically throughout the year if something changes so those estimates are great to keep you out of trouble but sometimes if you're growing business and your revenue is really increasing, you're going to owe more tax than what you've sent in. So, if you want to stay on top of paying in a more realistic amount, sometimes it's a good idea to track that based on your net profit so I'll have a spreadsheet that will list out what my net profit was and then what my estimated tax rate is so that I know, okay how far off am I here. Like if I paid in this amount, then how far off am I from the amount I most likely owe and then you can kind of course direct with it and in that last payment you send at the end of the year, you can send in a little bit more if you need to or even a little bit less if you need to so that you don't have such a big tax bill all at one time during tax season.

And then another great thing to use a spreadsheet for is just general important business information in one place. So if you have to access your EIN number which is the federal tax ID number that you know the US gives you or state ID number for your business or employer tax IDs like if you if you pay W2 employees and you need to just set up payroll IDs…with the state or federal ones different numbers like that that you need to access that don't want to have to go find the document and root through. You can put them all in this central location. And then some other things I recommend is utility expense at your home if you have a home office that you can deduct. That might be a good idea to track because depending on your situation your tax professional may want to know how much spent on utilities because you might be able to deduct a portion of that. And then also mileage. If you're not using an app on your phone already and you just want to use a spreadsheet, you can you can try your mileage this way. You just wanna make sure you're detailed about it. Like date, starting point, ending point, number of miles, business purpose… you want all of those details to be in your spreadsheet. 

And then the last thing I'm going to talk about when it comes to tracking your financial data and being organized with is an accounting online accounting software system. And this would be something that cloud based like a QuickBooks online. Also, Xero and FreshBooks are very popular ones. I recommend QuickBooks online. It's what I use for myself and exclusively in my in my bookkeeping business for my clients because it's very user friendly. Um it has a handy app you can use on your phone for snapping receipts and tracking mileage, so I definitely recommend QuickBooks online. But most of the online accounting software will offer that option of the app on your phone where you can use it for multiple things. But tracking your financial data in an online accounting system is a game changer as far as organization for small businesses. If you're super small and you're teetering on that does between using a spreadsheet for your financial report and accounting software, I do recommend using the software, if it's within your means to do that. I know QuickBooks online you can get started depending on your situation for as low as like twenty to thirty dollars a month for the QuickBooks simple start. And it goes up from there but if you can swing that it is completely worth it. Because as you're growing your business it's just gonna be much easier to manage it. And then you can easily run reports and have all of your historical data in one place. Spreadsheets can get complicated pretty quickly when you start growing, and they don't allow for some of the same reporting capabilities like comparing from year to year. So, I highly recommend using that online accounting software…as one of your main organizational tools and if you outsource your bookkeeping, this is also a fantastic way to be collaborating with your bookkeeper and your tax professional. So, QuickBooks online they have some spots you can add for your accountant, your bookkeeper, your tax pro they can both be added can see your books just like you can see your books and everybody's on the same page. So, It's a great collaboration tool.

And another thing I want to talk about that's a tiny bit outside of like the financial tool realm is tax management or task management software. Task management software is something that you can use to help you pretty much in every facet of your business, I use Monday.com which is amazing and I highly recommend it I'll link it in the show notes but It acts as a CRM which is customer relationship management tool. So it's going to act as task management and CRM. I use it for my bookkeeping monthly client tasks as well for employee tasks, and I use it for advertising and marketing tasks as well as podcast workflows. So, all the different areas of my business I'm using this to keep myself on track and stay organized. There are probably many things you can use this for in your business, but it can also be a really helpful tool for any financial admin tasks for your business like budgeting check ins DIY bookkeeping tasks, or sending documents to your outsourced professionals if you do that each month. So, if you know monthly, they are going to want certain statements or reports. You can set up this as a task that recurs monthly, and you get that reminder, and you don't have to wonder if you did it already or not you can just look and see if you marked it done. You can also embed videos in Google sheet So if you have employees that are also in this task management then you can do tutorial videos and add them there for them to access. I'll link this in the show notes so you can check it out if you're interested.

There are quite a few good reasons why it's worth organizing your business in all of these ways that I talked about today. Number one, you make your own life easier with one central location where things are easier to find. You have all of your financial data on hand and easy to manage. And you also can you know run those reports that allow for easy comparison from year to year in the your bookkeeping software. And then with a system like Monday, you can take the guess working confusion out of the daily and monthly workflows don't have to constantly wonder if you completed a certain task or, um you know, shoot you know “am I missing a step in the workflow”… you have a reminder right there and you can mark it off. So, you are making your life easier,.

And another reason to get organized in all these ways we talked about today is in order to better collaborate with outsource professionals and employees that are helping you. This one is really a game changer. For instance, if you're working with a new bookkeeper or tax professional, you'll also need to send them a lot of documents including formation documents, statements loan documents, and the list goes on. So rather than scrambling and looking all over the place, you can simply go to your business files and pull them out easily. You could even, if you're working with somebody you trust, you can give them access to it so that they can find it for you it's just really nice to know, okay I have a system in place and everything's organized and in a central location so it takes the guess work out.

Another big reason would be if you happen to be audited, which hope that doesn't happen to any of you, but I'm just being real here and I will let you know that this, of course, can be stressful situation already. And then if you have to look all over the place for receipts and documents, that's only going to add stress to the situation, it's also going to take up a ton of your time. Whereas if you have everything located in an easy to find place it's not going to be as disruptive to your life if something like this happens to you.

Do yourself a favor and get organized in your business so you can have peace of mind and smooth flowing operations that you deserve. This type of thing can really feel like a pain in the butt when you first implement it but it's so seamless and easy moving forward. Once you've set up these organizational systems, you'll thank yourself and everyone you work with will benefit as well.

When comes to your personal financial organization, I recommend setting things up the same way so that this system can also work for you in your personal life. Of course, you can leave out the accounting software and you don't necessarily need the spreadsheets but definitely the file organization and the budgeting will help you tremendously for the personal side of your finances.

I hope this episode lit a fire in you to get organized. And to help you in this journey I created a PDF guide to get organized with your business and your finances. I've titled it “The entrepreneur's guide to financial organization”, and you can check out the link in the show notes or you can go to financial adjusted.com/financial organization.

Until next time, remember that action brings clarity and imperfect action is better than no action!