It's Your Year to Get Financially Clear
May 23, 2024
Hello amazing entrepreneur! Whether you're just starting out, have been in business for a while, or are a seasoned entrepreneur, if you're tired of feeling fuzzy about your business finances, this blog post is for you.
Why Financial Clarity Matters
Having a clear financial picture of your small business and personal finances is crucial for reaching your goals. When there's vagueness around your money, making informed business decisions becomes challenging. Imagine wanting to purchase new equipment, lease a bigger space, or even determine how much you can afford to pay yourself. Without knowing your profit or the available cash, you're essentially operating blind.
Not knowing where you stand financially disempowers you, making you feel out of control—an entrepreneur's worst nightmare. Running a business requires immense dedication, and understanding your finances is key to ensuring your hard work pays off.
The Ripple Effect
Financial vagueness in your business trickles down to your personal life, especially if your business is your sole livelihood. You owe it to yourself, your business, and your family to invest time in gaining financial control. Achieving financial clarity leads to confidence, empowering you to make sound business decisions.
What is Financial Clarity?
Financial clarity means having a realistic, clear, and factual understanding of your finances. This involves examining past, present, and future data. To help you get there, I've created a free PDF checklist called "5 Steps to Financial Clarity." You can download it from our website, https://www.financiallyadjusted.com/. Today, we'll dive into these five steps to guide you towards financial empowerment.
- Know Your Business Entity
Understanding your business entity is crucial because it determines how you pay yourself. Whether you're a sole proprietor, an LLC, or an S Corp, knowing your structure helps in making informed financial decisions. For example, sole proprietors pay themselves through owner's draws, while S Corps require a salary and allow for additional draws.
- Establish Monthly Bookkeeping
Monthly financial reports are essential to keep your finger on the pulse of your business. Even if your transactions are minimal, establishing a habit of reviewing your balance sheet and profit and loss statement monthly is crucial. These reports will help you understand your profitability and make informed business decisions.
- Track and Analyze Monthly Expenses
Tracking monthly expenses can save you money and help identify unnecessary subscriptions or charges. Regularly reviewing your profit and loss statement ensures you catch any discrepancies and understand where your money is going. This responsibility lies with you as the business owner, even if you outsource bookkeeping.
- Create and Follow a Realistic Business Budget
A realistic budget is vital for navigating your financial goals. Consider a budget the financial GPS roadmap for your business. By setting a budget three to six months in advance, you establish a plan for your money, preventing it from disappearing aimlessly. Following a budget helps you manage growth, success, and overall business direction.
- Allocate Your Profit Properly
Understanding and allocating profit correctly is key. The first place you’ll allocate profit to each month is tax savings. Set aside 25-30% of your profit for estimated quarterly tax payments and to avoid scrambling to find the money during tax season. The remaining profit can be used to pay off debt, save, reinvest, or pay yourself, depending on your business needs and goals.
Implementing these five steps will absolutely level up your business success. For those new to business finance, take it one step at a time. Managing your finances is an ongoing practice, but with time, you'll become more efficient and confident.
I hope this information brought you value. If it did, please follow us and share this information with anyone who might benefit. Be sure to check out my free financial resources at https://www.financiallyadjusted.com/.
Remember, gaining financial clarity isn't just about numbers—it's about empowering yourself to achieve your business dreams. Let's get financially clear together!
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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