The Very First Steps in How to Manage Business Finances

Quick gut check before we dive in… if you already have a decent handle on your business finances, this post is the pre-req level, not the advanced class— you’ll want to head to my “How to Organize Business Finances with the COAST Method” post instead. If you're still in the thick of trying to get organized, keep scrolling. You're exactly where you need to be!

If handling your business finances isn’t your *favorite* part of running your business… you wouldn’t be alone in that. As a small-business financial consultant, I virtually connect with solopreneurs who are SO good at serving their clients, and when it comes to managing money, they can find literally anything else to do. Time to go through spam emails, anyone?!

Between client work, marketing, and actually running your business, crunching numbers tends to be one of the tasks that gets pushed to the back burner. Maybe you've even thought, “I’m just not a numbers person." But knowing how to organize your business finances isn't about becoming an accounting wizard... promise. It's about building a comfortable relationship with your money, one small step at a time.

We'll begin exploring how to manage business finances with no accounting jargon– just practical, actionable steps to help you step into the boss bitch limelight where you belong.

It’s Okay if Business Finances Aren't Your Zone of Genius

Starting a business brings on a whole host of emotions, especially when your passion and purpose are what fire you up. However, when it comes to managing finances, many entrepreneurs stumble around– it’s only natural. BUT, it's important to remember that every successful business owner once stood where you are now. This initial uncertainty does not reflect your capabilities, because hear me now: Understanding the ebb and flow of money in your business is not an innate skill. 

When something isn’t in our zone of genius (or even our zone of excellence), it eats up more time than we'd like. Like a whole day spent trying to tidy up messy books. But each bit of time you spend understanding your financial landscape is a step towards becoming the Comfy with Financials Officer (CFO)  you know you can be.

I know every business owner likes to tout that their offer will save your business… ha! Same! Because I firmly believe getting comfortable and confident with money is THE thing that creates the most security and stability for your business. When you can dial in on your business's financial inflows and outflows, you can prepare for the low periods and make more confident decisions about pricing, expenses, and growth opportunities. The world will be your oyster!

With organized finances, you…

• will reclaim precious time once lost to the bookkeeping gods

The efficiency will allow you to focus more on your passion, which is the reason you started your business in the first place. 

• will feel lighter as tax season approaches

Knowing you're prepared and excited to see the full picture of your year's accomplishments can feel like a full 180! (The words excited and taxes in the same sentence?! Yep. It’s possible.) 

With a bit of persistence and the right ambiance to get you through, you'll develop systems that make bookkeeping a smooth, efficient part of your routine.

Getting to the Root

All this talk reminds me of Sara.* She was chugging along in her business, but couldn’t figure out why her personal credit card balances remained unchanged. Because our business and personal finances are so connected (not co-mingled!), sometimes it’s difficult to see the root of the problem. We dove into investigation mode to find the source. Turns out, it was an issue of interpreting her numbers incorrectly. She thought the business was bringing in more than it actually was.

Having accurate information allowed her to make a few tweaks that upped her cash inflow. More money coming into the business while business expenses remain the same means what?! More money in her pocket! And as a result… the personal credit card balances started to dwindle. Huzzah!

But I’m not stopping the blog post here–let’s keep this party going, shall we?

Getting Familiar with Your Bank Accounts

Truly understanding what’s coming and going in your business… I’ll say it again… 🗣️ is a skill.  

Which can be developed with small incremental steps.

If you need a few teeny steps to start getting comfortable, I’ll list two here. If you’re ready for a bigger step, head to the “Separate Business and Personal Money” section. 

1) Log in to your bank account on a weekly basis and look through the transactions. No need to take action; just look. 

2) Download your statements at the end of each month. Look at the total inflow and total outflow for the month. Getting used to looking at the numbers can help calm your nervous system and alleviate angst.

Once you've done this for a month or two, it's time to level up: start categorizing those transactions. I know, I know— we just talked about not taking action, and now I'm telling you to take action. But the goal is to calm your nervous system AND give you the truth so I don’t find you in a three-day panic spiral come tax time. Now for some of those small incremental steps…

Separate Business and Personal Money

Remember when I mentioned going into investigation mode with Sara*? It makes it much more difficult to do when your business and personal finances live under one roof. Not only that, but if you go through an IRS audit (or a lawsuit) and your finances are commingled, your personal funds are subject to the taking. And nobody wants that. So please, for the love of everything holy, have a business checking and savings account. 

Note: you don’t have to open an official business checking account with your financial institution–it can just be a secondary personal account.

Schedule Regular Money Dates

I mentioned ambiance before– this is where it comes into play.

Sure, you can just sit down and stare at your transactions, but what’s the fun in that?!

A “date” style atmosphere allows you to create a pleasant environment while tackling something that may not feel so pleasant right now. Have you heard of habit stacking? Where you do something you love while doing another something… such as listening to your favorite podcast while you wash windows. It’s kinda like that.

The husband and I would pour some wine, turn on our favorite tunes, and have snacks while we talked money. It became something we looked forward to versus dreaded. Goal achieved. Just don’t forget to put your money dates on the calendar. “If it’s not on the calendar, it doesn’t get done” …amirite?!

Getting Familiar with the Inflows & Outflows

Let's close the gap between "I have money in my account" and "I actually know what my business is doing."

This is the step that gets you familiar with what's actually moving in and out of your business, so that when it is time to talk about paying yourself, you've got real numbers instead of a guess and a prayer.

Inflows

Your bank statement is a helpful little tool that offers concise information. Each month, head to your business checking account and review your statement, noting these two items: Total Deposits and Total Debits (Withdrawals).

While reviewing the statement, look for the “Total Deposits” line.

This is your gross revenue, the total amount your business brought in for the month. Document that number.

IMPORTANT: Gross revenue belongs to the business– not you. (said in a very soft & loving tone) 

Example

Jan: $2,500

Feb: $5,750

Mar: $8,700

Apr: $1,200

The monthly totals are important numbers, and so is the average! Here’s how you find that:

Total: $18,150

Number of Months: 4

Average: $18,150 / 4 = $4,537.50

Your inflow average becomes the number you base decisions on–don’t forget to rerun your average as your business grows & changes!

Outflows

While reviewing the statement, look for the “Total Debits (Withdrawals)” line. Document that number.

Note: Unless you’re an S-Corp, don’t include any transfers to your personal checking account (your owner’s pay). You only want to look at true expenses.

Example

Jan: $56

Feb: $7,200

Mar: $1,300

Apr: $1,300

The monthly totals are important numbers, and so is the average! Here’s how you find that:

Total: $9,856

Number of Months: 4

Average: $9,856 / 4 = $2,464

Your average outflow becomes the number you base decisions on–don’t forget to rerun your average as your business grows & changes!

Profit or Loss (that is the question)

Now that you’ve looked at the ins & the outs, the most important part of keeping your business running is making a profit. Here’s how you calculate that…

Here’s how you calculate that…

Income - Expenses = Profit or Loss

Example

Income Expenses Profit/Loss

$2,500 $56 $2,444

$5,750 $7,200 ($1,450)

$8,700 $1,300 $7,400

$1,200 $1,300 ($100)

Losses aren’t inherently bad; they happen all the time in businesses. But if the average is a loss and you didn’t plan for that with hefty savings… it's time to start brainstorming, my friend.

Frequently Asked Questions

An abbreviated version for the skimmers

How often should I review my business finances?

Weekly for a quick look at transactions, monthly for the full picture— total inflow, total outflow, and profit or loss. You don't need daily check-ins to stay on top of your money… pinky promise!

What's the difference between gross revenue and profit?

Gross revenue is everything that comes into your business (aka before expenses) & it's not yours to spend. Profit is what's left after expenses are subtracted. That's the number that reflects how your business is doing.

Do I need a separate bank account for my business?

100% yes, no questions asked— even if it's just a second personal account. Keeping business and personal money separate protects you if you're ever audited or sued, and it makes it far easier to see what's actually going on financially.

How long should I just "look" at my transactions before I start categorizing them?

A month or two of just looking is great for building the habit and easing your nervous system into it, but you can’t stay there. Transactions need to be categorized, especially for taxes, or you'll fall behind fast. That's exactly what a simple system (like my revenue & expense tracker listed below) is for… to keep you on top of your game! 

The Conclusion of The Very First Step in How to Manage Business Finances

Your financial journey doesn't have to be perfect to be powerful. Remember when we talked about Sara at the beginning? She wasn't doing anything wrong– she just needed a fresh perspective and some simple adjustments to really see what the numbers were telling her.

That's all it takes sometimes: small steps, consistent habits, and giving yourself permission to learn as you go. And with each money date you schedule and each statement you review, you're building the foundation for a business that doesn't just survive but thrives.

Remember that categorizing step we talked about? I made this for you so you don't have to build the system from scratch. 👇

The Revenue & Expense Tracker for Small Businesses

Grab my Revenue & Expense Tracker here for $29– complete with ready-to-use spreadsheets and a video to walk you through it all. You’re meant to build this business; this tool will ensure you’re not avoiding your numbers along the way.

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Here's to being comfy with money! 🛋️

Melissa Mittelstaedt

Financial Consultant | Accredited Financial Counselor®

www.melissamitt.com

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