Entrepreneurs, get your financial house in order for 2016


Shannah Compton Game

Shannah Compton Game

Blog author Shannah Compton Game

Shannah is a Certified Financial Planner Professional who is a millennial money financial strategist. You can find her online at http://www.yourmillennialmoney.com, listen to her podcast Millennial Money on iTunes and follow her on Twitter at shannahgame.

Published December 30, 2015|7 min read

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The end of a year and the beginning of a new one signals a special time for entrepreneurs to get their financial house in order. It's a time of year where you can break old bad habits and establish new ones that will propel your business further than ever before.

If you're just starting out, setting up new systems can seem like a daunting task with a laundry list of items to check off. If you're an established entrepreneur, it's easy to get lazy and let a lot of the "must do" items fall to the bottom of the list. No matter your situation, we've pulled together some great resources and business tips for entrepreneurs that will help you make your career easier, and more profitable, in the New Year.

Business tips for entrepreneurs

Part 1: Get your systems together

Know your numbers - The very basis of good financial planning is to know your numbers – the inflows and outflows each month. Unfortunately, most people can only guesstimate these numbers. Here's a hint: If your personal finances are a mess, chances are your business finances will be as well. First, start with your personal finances. Get those in shape, and know your numbers inside and out. From there, move on to your business finances.

Calendar time with your finances - Just like you set aside time to meet with your clients, you also need to set aside time each week to meet with your finances. Make yourself a regular weekly appointment to update your books, pay your invoices and take a look at projections for the upcoming week.

Get a budget - Yes, that "B" word is very important to your financial success, there's no escaping it. The good news is that there are some great apps that you can use to help make your budgeting process super easy and efficient. Some of the leaders are You Need a Budget (YNAB) and Mint.com. While these budget apps are traditionally for managing personal finances, they work great for an entrepreneur who is just starting out, and hey have amazing features like being able to take a picture of your receipts for easy budget entry, and auto-categorization for all your expenses.

Let's get separated - The first rule of thumb as an entrepreneur is to keep your personal and business finances separated. There are two purposes for this – first, you can easily track the inflows and outflows of your business finances, and second, when it's time to pay taxes having your business finances separated will save you many hours of pulling out your hair trying to figure out your expenses and income. Open a separate checking account and a separate credit card for your business finances. You can certainly do this at your current bank, which is what most entrepreneurs do, or you can look at an online bank that might pay more interest like Ally Bank or Capital One 360 (see below for more info).

The more, the merrier - When it comes to money, we can all probably agree that the name of the game is to make more money, not less. Since we're talking about separating our personal and business finances, it's also a great idea to get separate savings account for our business. What you might not know is that most traditional banks offer the lowest interest crediting rate, and right now that rate is somewhere around .02%. We can thank the 2008-2009 stock market crash for those low-interest rates. Meanwhile, banks like Ally Bank and Capital One 360 offer a different type of savings account, the high-yield savings account. These types of accounts offer higher levels of interest, most around .75-1%. Although that's nothing to write home about, as we said, more money is simply more money.

Part 2: Expense tracking

Go robust - Programs like Quicken Home and Business and Moneydance for Mac users help make your life a lot easier when it comes to filing your taxes. These programs are robust and let you track income and expenses easily. With a click of a button, you can print a report to send to your accountant at tax time rather than having to add up all those pesky receipts. No matter what program or app you decide to use, you will want to make sure you keep a copy of ALL of your business receipts in the event you are audited by the IRS. Get yourself a large storage box and save your receipts for at least a couple of years.

-> Prefer digital records over paper? Here's how to use Evernote as a virtual storage box for your receipts.

Expense tracking made easy - If a robust program is too much for you starting out, but you want a good resource to maintain your business expenses, check out Shoeboxed, Concur and Expensify. These programs make creating and maintaining expense reports painless and easy. They are designed for entrepreneurs on the go who love the ease of updating and tracking expenses with a mobile device. You can also print these reports off at tax time, which will save you time and money.

Part 3: Retirement planning

Zero in - It's a great time to zero in and come up with a ballpark figure for how much income you expect to make in 2016. It's going to be an estimate, so don't worry about counting every last penny. If you are working with a CPA or accountant, they can easily help you figure out these numbers based on your income and taxes for 2015. With this estimate, you can now figure out how much you can set aside for your retirement plan and get busy investing.

Out with the old - If you have an old (meaning one you aren't currently contributing to) 401(k) just sitting with an employer that you no longer work with, consider moving it to an IRA so you can have more investment options and more control.

Set it up - There are lots of options for retirement plans as an entrepreneur, and they all have different pros and cons. Two of the most popular choices are the SEP-IRA or Solo 401(k). These plans allow for higher retirement contributions over a traditional IRA or ROTH, which could be a blessing in a year where you expect to make a large income. If you don't know where to turn, check out Fidelity or Vanguard for guidance on setting up your retirement plan. The good news is that you can fund your SEP IRA or IRA until April 2016 for 2015 contributions, so you have a few extra months to sock away some money.

Part 4: All the rest

Life savers - As an entrepreneur, you likely have more passwords and logins than even a certifiable genius could memorize. An easy life saver (and soon your new best friend) is to create a password protected Excel document that contains all of your login and password information for important vendors and accounts. Make sure at least one other person knows how (and where) to access this document in case anything happens to you, and update the document each time you get a new login or password.

-> Learn how to create better passwords--and keep them safe from hackers.

Link in - LinkedIn is one of the best tools for entrepreneurs because it allows you to connect to people that you otherwise wouldn't be able to access. You can set up professional groups for your company or connect with prospects easily and efficiently. Make sure you keep your profile updated and don't be shy about sharing status updates to your connections.

Awesome online tools - If you're just starting out or need a little web revamp, look into awesome online tools that are inexpensive but pack quite a punch. Some entrepreneur favorites are Studio Press for easy-to-use Wordpress templates to build your website, Convertkit for sending out mass emails, Squarespace for killer sales pages and Blue Host for low-cost hosting services.

This checklist is full of great tips and tricks for entrepreneurs no matter what stage your business might be in. We're hoping that 2016 will be your best, and most profitable, year ahead.

Image: Olu Eletu