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Rebecca Tervo, CPA is a Certified [link widoczny dla zalogowanych] QuickBooks Proadvisor who helps small biz owners run the money side of their business. Get her free video lesson: The Top 10 Bookkeeping Mistakes Businesses make and How You Can Avoid Them at
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Submitted : 2011-09-21 00:00:00Word Count : 660Popularity: Not RatedTags: Tervo Financial Fitness LLC, Rebecca Tervo, Bookkeeping, Business, business expense, Entrepreneur, goal setting, personal finance, Recordkeeping
Figuring out where you want to spend your money:
If you were to look at the total actual money you take [link widoczny dla zalogowanych] in over a year's time in your business, where do you want to spend that money?
-How much of that money do you want to take home and use for personal expenses?
-How much of that money do you want to put aside in a business savings account for future expenses?
-How much of that [link widoczny dla zalogowanych] money do you want to pay on debt? (If you have any)
Here's an example of what my money management category goals were (% of total revenue) at the beginning of last year:
-50% to business expenses (including taxes)
-10% to training for myself-put to business savings
-10% to my business savings-for future expenses/investment/6 month "emergency fund"
-30% as a draw for myself
I didn't have business debt, but if you do…you'll want to add a category to pay down debt. As I went through the year, I looked every month to see how the actual percentages were turning out. Some months they were SPOT ON…and other months they were quite different.
[link widoczny dla zalogowanych] Why this activity is so important:

1. Gives you guidelines when making spending decisions in your business. If my goal is to only spend up to 50% [link widoczny dla zalogowanych] of my revenue [link widoczny dla zalogowanych] on business expenses, then I have that in the back of my head when I'm looking at possibly buying a new scanner, or adding an assistant to my business.
2. Gets you to pay yourself every month. Yes, you need to keep your business finances and personal finances separate. Instead of taking money out of the business by paying for personal items with your business checks or business credit card, pay yourself a check each month. And, work that check into your family budget.
3. Reminds you to invest in yourself. Having goals to set aside money on a regular basis for things like coaching courses, online training programs, or LIVE conferences helps to make this an important part of your business. And, you won't feel guilty when you've built up the funds to head to a conference in Las Vegas.
4. Helps form savings habits. I've been guilty many times in my life of ignoring the savings account. What I've noticed about the times when our savings account grew….I got [link widoczny dla zalogowanych] in the habit of transferring money to my savings account at least on a monthly basis. TIP: If you're finding it hard to establish a savings account, start with a small amount, like 5%, of EACH payment received in your business. Take that 5% and transfer it over immediately to your savings. Make a [link widoczny dla zalogowanych] promise to not touch your savings except for "preapproved things" it's meant for.
5. Allows [link widoczny dla zalogowanych] you to always have the money available for those infrequent expenses. I use a business savings account for things like tax savings (for my estimated quarterly returns) and professional liability insurance that only gets paid once a year. TIP: Break up the yearly payment amount into monthly payments for all large amounts due on a yearly or quarterly basis. Pay that amount to your business savings account each month, and those large payments will be available when the time comes.
What about the "Budget"?:
Budgets are awesome…BUT I think it's important to STEP BACK and get the big picture first. Budgets will detail every income [link widoczny dla zalogowanych] and expense category for your business. First let's work on the overall picture. Once you get comfortable with finding the right percentages for the categories above, then you can look inside the business expenses category and try to create goals within each type of expense. I find that it's too overwhelming for my clients when we start right away with a line by line budget. Instead, [link widoczny dla zalogowanych] we figure out the broader goals and narrow them down from there.
These general spending/money management [link widoczny dla zalogowanych] categories for your business will guide us when making money decisions throughout the year.
General Spending/Money Management Categories For Your Business
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