Here’s How to Manage Your Business Finances, According to a Financial Strategy Expert

by soco_admin | Apr 27, 2022 | News & Notes

Starlitt Miller helps entrepreneurs, freelancers, and micro-business owners manage their money. She’s spent countless hours working with them to help improve their finances. As founder of Start Accounting And Business Solutions (SAABS), she’s an expert in helping people sort through bookkeeping problems and develop better financial management practices. 

Spending so much time with business owners, she’s developed a keen understanding of what makes someone successful when it comes to a critical part of running a business: managing the money. 

No amount of talent, customer service, or product matters if the books are off. 

So, we asked Starlitt what she believes people need to do to keep their business finances in order. Here’s what she had to say. 

The Biggest Struggle for Most People: Discipline 

Establishing good financial practices early in the business is one of the most important keys to long-term success, according to Starlitt. And she said that’s hard for many people. Sometimes the business starts as a hobby or side gig but quickly grows into a larger income stream or a full-time job. So creating good habits and sticking to them is essential. 

“Being disciplined about separating and treating the business like a business, like it’s separate from you,” Miller said. 

In other words, you need a business bank account (and that’s the minimum). 

And Starlitt noted most people don’t need a complicated system. You can track revenue and expenses using a spreadsheet. 

Starlitt said she’s worked with many entrepreneurs who don’t establish good baseline practices. Instead, they use various payment methods and blend business expenses with personal. And this can cause problems when it comes to taxes and planning for the next year. 

“But very often, even at the baseline, it’s like, there’s too much gray space [with] how it’s being organized.” 

Starlitt said one of the critical steps for anyone, whether you’re full-time or just running a business on the side, is establishing an LLC, getting an Employer Identification Number (EIN), and separating your business finances from personal. This makes the organization easier, but it also helps protect your personal assets in legal cases involving your business. 

Even established businesses don’t take proper financial management steps, according to Starlitt. 

“So what I’m seeing is that that baseline of organizing, separating, it’s not taken seriously enough.” 

Part of the problem? 

Starlitt said she’s worked with many business owners who only look at their bank balance. 

“They [businesses] often hired and retained the CPA firm. [And]  from an operational standpoint within the year, unless they needed formal statements, they were looking at their bank balance to see how well they’re doing. The cash balance is one part of the picture,” Miller said. 

Even after establishing business bank accounts and setting up an LLC, it’s essential to track transactions and understand cash flow. 

Starlitt explained many people know they need to look at their financial statements but don’t understand them. And that’s okay. But, it’s important to work with someone (like Starlitt) to learn and be educated on the basics. 

“I do encourage them, and I approach our work together in an educational way because I never want someone to work with me because they have to or if they leave me they won’t know what’s going on within their business. That’s not a good position to be in.” 

Overcome Bad Habits with a Better System 

If tracking finances were easy, everyone would budget, save enough for retirement, and never worry about having cash to cover expenses. 

But human beings struggle to create beneficial financial habits. Starlitt said it’s tough to understand why people don’t manage their business income well because you deal with human behavior and everyone has different tendencies. 

Starlitt noted each person needs to understand their relationship with money. Everyone has a different background and experience with how they manage it. Those habits will bleed into your business as well. 

A critical step in establishing good financial habits is about connecting with the right tools and people, according to Starlitt. 

Many business owners only focus on what they owe the IRS and it dictates their view of how their business is performing. Starlitt says the IRS shouldn’t be the driving force behind why you look at your numbers. 

 “I think it [the IRS] deserves some level of being shrunken down to see a bigger picture because the operational side of your business and how you potentially grow it is why you also need to understand your numbers,” she said. 

For many entrepreneurs, it will require a mindset shift. 

“The mindset would be the starting point in my opinion and everything else is really about what you need as a person,” Starlitt said. 

From there, it’s important to establish a process to match your needs as a business owner and individual. 

If you’re looking for a system, Starlitt recommends Profit First to help establish a structure. The priority should be finding a system to benefit your business and your money management habits.  

Starlitt’s worked with many companies, and she said those who are most successful set up a system and stick to it. 

“Those that set up a system and then maintain it at a basic level, right, so you set up the organizational bins and you put things back where they belong,” Miller said. “You keep everything in its place, and you’re not missing any information.”

When you have your data organized and in the same place, it makes working with partners like accountants and business coaches much easier.  

Take the First Step 

Finances are intimidating for many business owners. Lots of folks don’t pay much attention because they’re focused on running the company and doing what they’re good at. But, when you signup to be an entrepreneur, this kind of work comes with the territory. 

Get yourself registered as an LLC. Or ask an expert (like an accountant) about the best structure for your business. Set up a business bank account (many have free checking). And start tracking your income and expenses using a basic spreadsheet. Each step will be another in the right direction toward good financial health for your business. And when you get to a place where you need additional support, find a great partner (like Starlitt!) to offer expertise. 

You can learn more about Starlitt Miller and her work (plus a new venture she’s starting) right here.