Last weekend here in Boston was drizzly and wet from start to finish. My daughter Emily was away for the weekend and I found myself inside and alone with the pets (Marty, Max and Chester) for two days.
This rarely happens and so, on Saturday morning, I thought to myself, “What do I want to do with all this free time?”
I’ve been so busy lately that it took me a few minutes to even consider the possibilities: work on a photo project that I’ve been meaning to start; finish reading Cheryl Strayed’s book Wild; or catch up with reconciling my RocketGirl business checking account.
I chose the third option.
Since I track my income in Excel and check my online bank accounts daily, it’s easy for me to justify putting off bank reconciliations. But now, after getting caught up, I can tell you that I won’t be putting it off again anytime soon. It was simple to do and it feels great to have it all taken care of.
When you’re a small business owner, tracking your income and expenses is critical. Here are a few things I want to you know about how to save time and get it done:
Automate whatever you can. One of the big reasons I use Xero to manage my company finances is that it connects to my bank account, my PayPal account and Square, my credit card processing company.What that means is that Xero is constantly updating my transactions. Whenever I log in, even if it’s been months, every penny that I’ve spent or earned is listed for me to categorize. What’s also cool is that, if you have the same transaction over and over (your cell phone bill, for example), Xero remembers which account to assign it to.
Keep filing simple. Some years I’ve had very elaborate filing systems for both my personal life and my businesses. I would systematically file away pieces of paper in designated folders with beautifully printed labels. But what I finally realized is that I never or rarely looked at those papers again.Here’s what I do now: Each month I keep a white envelope on my desk labeled with the current month and year. Throughout the month, I put receipts inside the envelope. When I reconcile my accounts, I look at the receipts to make sure I used my RocketGirl credit card. If I didn’t, I add the receipt to Xero, using my iPhone app so I can track the expense.At the end of the month, I seal the white envelope, mark it reconciled and toss it in a box. When the box is full, I send it down to the basement for safekeeping until I’m sure I can recycle the contents. If I ever need receipts, they’re organized by month and easy to find.
Learn to “Trim Tab.” Trim Tabbing is something my coach taught me about last year. You can read about it here, but the concept is simple: Make incremental corrections while always heading in the right direction.
For example, while I look closely at my bank account online every day, it’s pretty impossible to spot trends that way. Little things can slip by easily, and it’s not until they’re in your financial software that you can clearly see what’s going on.
Last December I subscribed to some software that I thought was pretty cool, but after paying $9.99 a month for nearly a year, I realized that I never used it. In the big picture, $120 may not seem like lot, but I can think of lots of things I’d do with $120 if someone just handed me a check! Keeping up with your finances reduces the chances of leaking money.
With my finances in order last Saturday, I turned to my other two projects and made significant progress on those as well. Even the pets seemed very proud of me, I must say.
Belinda,
Thanks, nice article! Question: What do you use Excel for, or more specifically: how do the expenses and income get from Xero to Excel? I’m the manager for a new LLC, and I was thinking that since all the expenses and income are via checks and bank transactions that I would simply use the bank account to keep track of expenses and income via the bank allowing me to download transaction history to a .csv to which I add columns of the categories of income and expenses and save as an .xlsx file. This minimizes my data entry. Sound like a good idea or do I really need something like Xero?
Hi Gail! Nice to hear from you.
In Excel I track my income by category and client. I have one section per month for Debit Card Revenue, one for Project and Retainer Revenue and another for Passive Revenue. They all tie together for a monthly total which is subtracted from my monthly goal. This way I can see how many hours of my time I’ve sold, and how close I am to hitting my revenue target for the month. Although this is a financial document it’s also a peace of mind document because I can refer to it quickly if Xero isn’t up to date and know where my finances stand.
In terms of tracking expenses I really like reporting feature that financial software like Xero has. There’s not much added data entry since all the transactions are downloaded automatically, and the categorization you’re doing in Excel you would then do in Xero. While Excel is working now, I would recommend some type of financial software so that as the company grows you an see the progression of the finances over time – and it will be easier to scale once it’s in place.
I hope that helps!
Belinda,
Nice article. I have used Quicken Deluxe since 1992 to record and track my personal finances. I can categorize expenses and income, generate a wide variety of reports, and export data to EXCEL. I can also download data from the bank, though I like to keep track of things so usually have already entered it by the time it shows up in the account. It is also useful for tracking charges to charge cards. For our Garden Club, the Treasurer uses Quickbooks.
Sue
Hi Sue!
Great to hear from you. I’ve used Quicken personally and QuickBooks since version 1. I think that makes me old:) They’re both good solutions – and in fact QuickBooks has an add-on for Point of Sale that’s terrific for retailers.
The reason I chose Xero this time around is because it’s very simple and I think well suited to a solo-professional like me – and it’s in the cloud. I know QB is available in a cloud version too, but it’s not nearly as robust as the desktop version. Thanks!