The four commandments of financial management
Good financial management is like planning for a great adventure.
You create the vision of where you want your business or organization to go, but financial management provides the road map.
Where do you want to go? What do you need? How will you get there? Who will bring the snacks?
Here at STAR Company we work with all kinds of clients in the arts and culture sector: self-employed artists and creatives; sole proprietors and incorporated business; nonprofits and charitable organizations. Although each of these different business structures has unique needs and considerations, all of them need a road map.
And because we work behind the scenes, we get lots of insight into the habits and practices that make good sense, are efficient – and most importantly – give you the financial picture you need for your journey.
Here are the four important guidelines when considering how to track your finances.
1. Figure out the right software solution for you.
We often have clients come to us who have very simple bookkeeping needs, but are using a complicated software program because their boyfriend/girlfriend told them to. We also see clients with very complex business operations and multiple administrators, using Excel. Bad software choices like these lead to frustration, confusion and inaccurate financial information.
Finding the right software is like having the right pair of shoes. If you are planning on climbing Everest, you don’t buy flip flops. And if you’re just planning on taking a leisurely walk around the block then hiking boots are complicated overkill. We are happy to talk with you more about the right solution for you, so give us a shout for a complimentary consultation.
2. Separate business and personal.
What does this mean? Set up a separate bank account for your business or profession, then deposit all your income and pay all your expenses out of that account. If you pay for business expenses out of your personal income, keep track of this by using a reimbursement form or out of pocket expense form. Don’t know what that is? E-mail us and we’ll send you one.
It may feel like an extra step in the beginning, but it will save you oodles of time in the long run.
3. Use a deposit book.
Everybody thinks they will remember what they deposited into their account last week. But then another week passes, a month, sometimes a year and suddenly you can’t for the life of you remember where that money came from. So, use a deposit book and write down in there who the cheque or cash you are depositing is from. If you never go to the teller, then write a description of where the money is from on the ATM receipt and staple the receipt to the deposit book. Again, it may feel like an extra step at the beginning, but in the long run will save you enormous amounts of time.
4. Get help.
Some of our clients are bookkeeping stars and could keep their own books (if they had the time). Some of our clients are allergic to HST returns and income tracking. The most important thing is to honestly determine when you are lacking time, skill, or both and act quickly to get help. Letting your bookkeeping get behind, or setting up your processes incorrectly invariably leads to bigger headaches (and bigger bills) down the road.
Financial management is built on solid systems and regular maintenance. Figure out the rights systems, and keep everything up to date. The result? Financial info that will help guide your adventures and give you peace of mind.