Here at Fiddler Online we work with a lot of small and startup businesses. Because we’re a small business ourselves, we often learn and develop new ways that help us run our business. We want to share that with our clients and anyone that it might help. So this is the first of our articles on practical tools and ideas for getting your small business started, and running it better, once you do.
When you very first start a new business, the last thing you should want to do is spend lots of money to get all the bells and whistles. Believe me, I’ve seen businesses start this way, and it usually amounts to a lot of debt the business has to pay off before they get profitable. Many are never able to pay it off, and go out of business before they do. This is bad for you, it’s bad for the economy, and bad for everyone. So don’t do that! There are simply certain things you must have and buy (like an awesome website), but most new businesses spend a lot on things they really don’t need initially. The best way to start is to start as cheaply as possible, then purchase (or add subscriptions) for the things that make the most sense over time.
When it comes to managing business finances, here’s what you shouldn’t do: go buy QuickBooks desktop software. I made this mistake myself, and guess what? My Dad’s a CPA, and I even hired somebody to teach me to use QuickBooks, not to mention I’m a pretty experienced computer person—in spite of all that, and after a lot of hours spent on that darn software, I still can’t use it. My results: over $300 and a whole lot of my time wasted. Now if you come from the old school and are trained in balancing books, etc., it might be worth it. But for anyone else, don’t bother, you’re just wasting time and money that could be used to really build your business!
Here’s how you should start: use Mint.com. Mint is free, and its a great way to track and budget your finances. It’s designed for personal finances, but will work just great for business as well. I wanted to try this option out, since I’m not quite ready to use QuickBooks online software. But I already had a personal Mint.com account, and it’s not designed to separate your business and personal stuff. After some searching, I found that Mint is okay with you creating a separate account for your business. So I did exactly that.
Setting it All Up
If you’re like me, you have your business bank account at the same place as your personal accounts. Since Mint uses your online banking to access your transactions, etc., it’s going to show both business and personal after your initial setup. You just head over to Mint.com and get started. It’ll have you enter your online banking information (don’t worry it’s very secure as long as you use a safe password for your new account), and you can do this for all your different bank accounts, loans, and investments. For this part, you’ll only want to do ones that apply to your business. If you use a 2nd bank that only has personal accounts, don’t add those accounts here, though you may want to add them under a separate, personal Mint account.
Once you get your various banks, credit unions, etc. (hopefully there’s only one or two if you’re a new business—eg. PayPal and Bank of America) added, Mint will import all the accounts from each of those institutions. You’ll see a screen like the one pictured here, and you’ll want to go to the last button on the end called “Hide” and hide any accounts that are personal. Then you can go and add any assets the business has. This is helpful for tracking stuff you can write-off and depreciate in your taxes after the new year. It also helps you get a picture of the total value of your company. Whether you can sell your assets and still get out without a loss.
The next step is to train Mint to recognize your transactions. Most it should know most merchants, but for a business I wanted some things categorized a little differently than for my personal finances. You do this by going to the “Transactions” tab, then clicking on specific transactions and renaming them, if you want, and re-categorizing them if needed. When you do this, if you click the little tab at the bottom of the transaction row called “Edit Details,” you’ll see that you can create a rule by clicking a little checkbox next to that rule. Mint will then rename and re-categorize any other transactions that are similar to that one. So in the future its all automatic.
I also added several categories under “Business Services” as well as under “Income” to more accurately separate out my income and expenses, to reflect a business approach.
I find it best to do this about once a quarter. Usually, after my initial thorough search to make sure everything is categorized correctly, I just look for “uncategorized” transactions, and set new rules for those.
Now that you’re all setup, you can go to the “Trends” tab to see where your money is going and coming from. You can adjust the length of time you want to see and see all kinds of different data, like spending over time or by category, income by merchant or tag, and a whole lot more.
Finally, it’s a great idea to go to the budget tab and set a budget for your business, perhaps based on the amount of income you have (the only way to get profitable is to spend less than you’re making). You can also head over to goals and set goals for paying off debt, savings, and even create custom goals—which could be a very useful tool for setting income and cash-flow goals, but it isn’t capable of that yet.
Because your finances are really the key to knowing if your business is doing well or not, this is an important area to invest in, once the business can afford it. So as soon as it makes sense, go ahead and upgrade to Quickbooks. But don’t get that darn desktop software, go with QuickBooks online. It’s much simpler, and more logical. If the desktop version is a dinosaur that’s left over from paper spreadsheets converted to black screens with orange text, QuickBooks online is the sleek new web 2.0 version that’s been completely redesigned from the ground up, and is far easier to use.