How often do you check your business finances?
As I was enjoying a beverage at my favorite watering hole (coffee shop), I was greeted with the following questions from a fellow freelancer, “So how often do you check your business accounts?”. Without hesitation, “Weekly” was my response. A blank stare from my fellow freelancer. I knew that an explanation was needed, in order for me to enjoy my dark roasted Columbia coffee with a hint of cream and two splenda.
If you have not separate your business expenses from personal, then make sure you do this first. That means the following, creating the type of organization (LLC, Inc., etc.), setting up a business bank account, and making sure to pay for your business expenses and accepting business payments in your business accounts.
After you have set up your business accounts, then you will need to create a budget. My business account budget is not concern about income (even though I have a minimal needed in order to pay my bills, but I have other tools in place in case my income is low for a particular month…ie, business saving account), the concern centers around expenses.
I check my business account every Saturday morning. I am checking for any subscriptions due the following week (Sunday – Saturday). I do not make a mental note, but I will write down the expenses in my business checking account. Making sure that the funds are available…and if they are not, then that means moving some money over to my checking account. I never use my business credit card for any personal expenses…this can be difficult at times, like does my cell phone fall under business or personal; what about my home internet…I do use it for business, and spend as much time at home as I do in my office. All of these questions, have been answered by my certified public accountant (CPA). I would recommend that you consult with one…because it differ from state to state and country to country.
Invoice payments. Am I expecting some this week? Are they on a recurring or invoicing method? Recurring means that the credit card is on file, and it will be charged on a specific date. Invoicing means that I have invoiced them previously, and they have until a certain date to pay the invoice. While I prefer recurring, I still have some clients, who need the invoice in hand. They like to make sure the funds are available prior to executing the invoice. As long as the invoice is paid on a timely manner (before it is due), than I am fine with either process.
Low funds. By checking my account on a regular basis, then if some funds need to be transfer. It is not a huge deal. The problem is when payments hit your bank, and you do not have enough money in your account. Overdraft payments are the worst. If you have a business bank account (or even personal), then I would strongly recommend having over draft protection with a saving account. If the funds are in your saving account, then they will move money to cover the shortage. This use to be a free service (and is for some banks), but reasoning I have notice that banks are charging a fee.
While my process does not take more than 15 – 20 minutes. It is a good practice with regards to your business bank account.
Image courtesy of Josh Appel.
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