Get ready to turn your small business finances from a game of guesswork into a well-oiled machine! This week, the focus is on empowering you with the financial literacy that's as vital as the air we breathe for any fledgling or soaring enterprise. We'll tackle the common traps of blindly delegating financial tasks and celebrate the liberation that comes with building your own 'numbers muscle'.
As your guide, I'll recount the pivotal moments when I learned the hard-hitting truth that understanding your finances is non-negotiable for sustainable growth and profitability. We'll explore the necessity of establishing a bookkeeping system that does more than just track expenses—it gives you foresight and control. No matter where you stand on your business path, this episode is your invitation to embrace the numbers game and make it your ally. Tune in, and let's secure your business's financial future together.
Homework: Download your choice of accounting software and spend the time it takes to get it linked with your accounts.
Be sure to subscribe to the podcast, and share it with someone who could benefit from what you heard. Also, head over to https://theerinolson.com/links and sign up for the email list, and you can get all the downloadable PDFs and tools! News: We finally have a YouTube channel! Visit us HERE: https://youtube.com/@theerinolson?si=xPNSU1-C7Yt9zXgD
Get ready to turn your small business finances from a game of guesswork into a well-oiled machine! This week, the focus is on empowering you with the financial literacy that's as vital as the air we breathe for any fledgling or soaring enterprise. We'll tackle the common traps of blindly delegating financial tasks and celebrate the liberation that comes with building your own 'numbers muscle'.
As your guide, I'll recount the pivotal moments when I learned the hard-hitting truth that understanding your finances is non-negotiable for sustainable growth and profitability. We'll explore the necessity of establishing a bookkeeping system that does more than just track expenses—it gives you foresight and control. No matter where you stand on your business path, this episode is your invitation to embrace the numbers game and make it your ally. Tune in, and let's secure your business's financial future together.
Homework: Download your choice of accounting software and spend the time it takes to get it linked with your accounts.
Be sure to subscribe to the podcast, and share it with someone who could benefit from what you heard. Also, head over to https://theerinolson.com/links and sign up for the email list, and you can get all the downloadable PDFs and tools! News: We finally have a YouTube channel! Visit us HERE: https://youtube.com/@theerinolson?si=xPNSU1-C7Yt9zXgD
See ya next week! Erin
Speaker 1:
Welcome to the Quality of Life podcast. I'm Erin Olson, a wife, a mother and a serial entrepreneur. After starting three successful businesses, I've learned some hard lessons regarding the ins and the outs of starting and running a small business. My intention is to share my knowledge that I've learned from the School of Hard Knocks so you don't have to learn it the hard way like I did Each week, I hope, to guide you to the next level in your business or in the business that you're working. So let's go.
Speaker 1:
Hey guys, welcome back to the Quality of Life podcast. Erin Olson here helping you to get from your business idea to a booming business. Last week, we talked about auditing your time to see if there are any ways to work more efficiently or to find more time in your day that could be better used. Well, I hope you printed out the Time Tracker PDF and took a look at how you spend your time. If not, I'm going to put that in the show notes. I really hope that it helps you see where your time went and also helps you to plan and budget your time moving forward. Well, since we touched on budgeting and being a good steward of your time, now I want to talk to you about getting to know your numbers so you can be a good steward of your money.
Speaker 1:
Right now, your business may be small enough to run by watching your checking account and acting accordingly, but let me tell you that as your business starts to grow, you won't be able to keep track as closely as you do right now. When you start sending out invoices and not getting paid immediately, you can run into cash flow issues. And then there is this little thing called taxes that the government doesn't like you to not pay promptly. There were too many years that I did business by watching my bank account and as tax time rolled around, I had shown all of these sales and no money to pay taxes for them. It's a real issue. The books would show income, but there was nothing in my account to show for it. This cycle went on and on until I got a handle on how to plan and budget and cash flow. All of these things are so important to making money and a profit, and that's the goal with your business right.
Speaker 1:
To be completely honest, I was never very good with money growing up. My parents were always broke and so that is what I grew up believing that we were always broke and I told myself that I couldn't wrap my head around my numbers, and so I tried to pawn it off so many times on other quote professionals. But that got me in trouble because I never took the time to learn about them and to learn why they matter so much. There came a point where I needed to figure them out for myself and not just trust someone else to make those numbers jive for me. And I will tell you in my last business my eyes were opened to how trusting others to have the same spending and budgeting and bookkeeping habits that I do can get you into a lot of trouble. Please don't trust anybody else to understand these things for you. As a small business owner, it is your responsibility and your job to dedicate time to figuring this out, and when you do, you will be able to capitalize on your spending and your planning. Then, as your girl that um numbers muscle, you can then make sure that anyone you hire to help you is fully qualified to do it the way your business needs. I can help get you to that point simply by telling you how some of my biggest money mistakes help teach me the importance of learning my numbers. First, I have to give you this disclaimer I am not a bookkeeper, I'm not an accountant, I'm not a controller or a CPA. I am just a girl that made a lot of mistakes and I hope to help keep you from making the same ones that I did. So learn your numbers, all right. So what exactly do you need to do to learn your numbers? Well, first and foremost, you need a bookkeeping system.
Speaker 1:
Back in the day, my business was small and my customers usually paid for my products or services at the time that I did the job or gave them the product, so that really simplified things. I also had horrible credit and refused to get a credit card, so that made it super easy to track my expenses. I would just gather my monthly bank statements at the end of the year and highlight the different expenses to separate out the different categories. This was time consuming and didn't really give me any insight to planning for the next year. It was just me doing the best I could with the information that I had. Then I was turned on to QuickBooks Fresh Start. It was easy. I just linked my bank account to it and separated my expenses into the categories as a year went on. This was such an upgrade Now there are so many accounting software companies out there, not just QuickBooks.
Speaker 1:
This is just what I learned on. There are different programs that work better with different types of businesses, and there might already be one specifically for your industry, so take a little time to do a quick Google search. Since I hope that you have already gotten your website up and running after listening to episode number 40, on GoDaddy or Shopify, you will want one that integrates with those platforms. If you haven't got that website up yet, go listen to that episode. It's number 40 and I will link it in the show notes. The software that integrates the best with those two platforms are QuickBooks Online, xero that's with an X Wave and Zoho Books. I am not affiliated with any of these companies, but I have used QuickBooks Online or QBO the most. It's not the cheapest, however, and Wave is a free software, so if you are on a budget, this might be the best option for you. I will link all of these in the show notes as well. If you have an accountant, they can help you choose and might even be able to get you a discount on QuickBooks, so it doesn't hurt to ask them their opinion, but any software you choose will be so much better than paper and pencil.
Speaker 1:
Choose a software and dedicate at least a whole day towards setting it up. If you have to attack it in smaller time chunks, that's okay, but this is vitally important to your business and its growth. Take your bank accounts and your credit cards to it and let it import all of your sales and most of the expenses. The software should actually learn how to categorize your expenses the more you use it, and that will make your job even easier. With most of the software out there, you can store customer information and create invoices on them as well. This makes invoicing and keeping track of your sales so much easier.
Speaker 1:
The best part of all of these programs is the fact that you can run reports and print out financial statements like profit and loss, balance sheet and cash flow statements. Now, don't get overwhelmed by this terminology. They are just business lingo for snapshots of how your business is doing financially, so I'm going to break those down for you. Your profit and loss statement, also called an income statement, just summarizes your revenue, that is, your income, your expenses and the net income, whether your business made or lost money over a specific time. This is usually done monthly, quarterly or yearly. Well, why do you need to know this? This shows whether your business is making or losing money. Kind of important to know this right. It also gives you insight into where your revenue comes from cost of goods sold, operating expenses and overall profitability. By digging into this P&L statement, or profit and loss statement, you can start to identify trends, assess performance and you can actually start to make strategic decisions to become more profitable.
Speaker 1:
Your balance sheet gives you just a snapshot of your business's financial position at a specific time, so why is this one important to look at? The balance sheet tells you how healthy your business is financially. This is what banks want to look at when they deal with you. It breaks down what you own, your assets, what you owe your liabilities and the difference between the two, which would be your equity. It gives you an instant view of where you're at. Your cash flow statement, tracks the flow of cash coming in and the cash going back out, and gives you information like what makes you the most money in your business and where you spend the most cash. It also categorizes those expenditures into the different operating expenses. That can help you to make sure that you have enough to cover all of those upcoming expenses. It also can help you to see if there are any slower months to plan for in the future. Oh, and one more thing it also helps you see where spending could be addressed and maybe where you could be saving money, like if you were to purchase things in a higher quantity so you can get a bigger price break. I think that one of the biggest things these reports help you do is to make sure that you are getting paid the money you should be and spending only the money you need to to keep things going well. So why is it important to know these numbers? Well, managing your money in business is so important.
Speaker 1:
When I started out, I wanted to bootstrap it, and that is to not take out any loans. That meant I needed to make sure that every dollar that came in was spent in the most important place. Basically, in the beginning, I took all of my sales and I purchased more inventory and spent so little on advertising and anything else, and I didn't even take a paycheck for the first full year. That is why I have some overlap. In the businesses that I owned, I had to still finance my life and run the business.
Speaker 1:
If you are not making a profit and a paycheck right away.
Speaker 1:
Please don't be hard on yourself. It will come. The faster you get comfortable with knowing your numbers, the faster you can make your business profitable and the faster you can take a real paycheck. See, that wasn't that scary. This is something that you can't hide from, and sticking your head in the sand to avoid learning your numbers and what they mean will only come back to bite you in the butt in the future. This is coming from a girl who did it for years.
Speaker 1:
Now that we've dipped our toes into the financial end of your business, next week we are going to talk about your financial team and who to align with. Well, guys, that is all the info you need to get started with an accounting software and why you need it. Our homework this week is to get one of these programs linked to your bank account and your credit cards, and, believe me, you and your accountant will be glad you did. I hope this helped you so much and thank you for joining me, and, if you liked it, please share it with somebody else, who probably should get to know their numbers and their books as well, and let's all raise all of our quality of life. I will see you next week on the Quality of Life podcast. See ya. Thanks for listening to today's episode. Be sure to check us out on the Quality of Life podcast Facebook and Instagram pages and our website, theaaronolsoncom, for downloads and more information. That is T-H-E-E-R-I-N-O-L-S-O-Ncom. Stay up to date by joining our email newsletter. Together, we can improve all of our quality of life.