Books refers to the financial records of your business, kept in a way such that you can generate reports for tax purposes and for you to analyze the performance of your business.  The books include information about your income & expenses and your assets & debts.  

There is no one right way to keep books — you must choose a method that makes sense for how your business works, that you understand, and that you can use to create good reports.  

You may use hand-written ledgers, but it is more difficult to create reports and you must trust your own math.  I generally recommend, at the minimum, using spreadsheet software such as Excel.  Most businesses should use bookkeeping or accounting software like QuickBooks, to take advantage of all the automatic reports that it can create.  

One place where many business owners get stuck is how to categorize their transactions, or what to name the accounts.  This is another place where there is no one right way.  You must create names that work for creating good reports, figuring your taxes, and that make sense to you.  But make sure that whoever else looks at your books, like your accountant or tax preparer, understands your account labels, especially when they are drafting your tax return.   More on Books 101: The Right Way to Keep Your Small Business Bookkeeping

Cash Flow Mistake #4 - Missing a System. 

Have you:  Created a beautiful, highly detailed cash flow projection spreadsheet — never to look at it again?  Been six months or more behind in your bookkeeping, until your tax accountant is ready to fire you as a client?  Spent hundreds of dollars on advertising that got you nowhere fast?  Decide if you can afford something by today's balance in your checking account?  Been crazy-busy with clients, and all of a sudden, your business completely dries up?

Here's the Truth:  You need a system.  Managing your cash flow must become a habit.  Each week set an appointment on your calendar for a "Money Meeting" with yourself to review the finances of your business.  Schedule this appointment & commit to it just like a client meeting or doctor's appointment.  Could be as little as 10-20 minutes per week — if it overwhelms you, set a timer for just 15 focused minutes and give yourself permission to stop when the timer says "buzz."

Having accountability issues?  Hook up with another member of the Mastermind and schedule your appointments together.  At the set time call each other to confirm you are reviewing your finances, and send up a follow-up email afterwards to celebrate your progress (no need to share the exact financial details). 

Cash Flow Mistake #3 - "It Must Be Perfect."

I know a new client has fallen for this mistake when they hand me a multi-page, color coded, 40-category Cash Flow Projection spreadsheet.  And it's dated 3 years ago.

In an effort to "do it right," we try to create financial reports that are completely accurate and perfect.  Everything according to Fortune-500 accounting principles, highly detailed notes, extensive competitor research, and sub-part after sub-category.  But what happens?

These beautiful spreadsheets gets stuck in a drawer, never to be used again.  What a colossal waste of your time! 

Here's the Truth:  Simple is powerful. You need short, summarized financial reporting that you can actually use!  You can use two simple one-page spreadsheets to troubleshoot income problems before they start and make powerful planning decisions for the future of your business. 

These two spreadsheets are Marketing & Sales Weekly Report (statistics tracking your sales process and how you generate income) and Monthly Cash Flow Projections (projected income and budgeted expenses).

By the way, perfection is impossible.  When you are projecting the income or budgeting the expenses of your business, you are trying to predict the future.  It's an educated guess.  Your projections will never be perfect — but all you need is information just "good enough" to help you create and make changes to your business & marketing plans. 

Trying to predict weekly Cash Flow?  If you are trying to micro-manage weekly Cash Flow Projections, that's a sign you need short-term financing, such as a business Line of Credit or even a traditional American Express card. 

(part 4 coming next week)

Cash Flow Mistake #2 - "I'm Not Good With Money."

I know some of you reading this article are saying, "but Elizabeth, I'm just not good with money.  I'm not a numbers person."  I'm here to get in your face and say, pshaw!  I don't buy that story!

First, if you are constantly saying to yourself that you are not good with money, what message are you saying to yourself, your clients, and the universe?  Before great wealth will ever manifest itself in your life, you must change the mantra in your brain.   More on How to Avoid the 4 Cash Flow Mistakes, part 2

When you started your business, you may have thought you were going to help people.  Change the world.  Enjoy working at home.  Make a good income.  Have control over your life as a self-employed entrepreneur. 

But what are you really doing?  Checking the bank account to see if you have enough cash to pay your rent.  Cringing at the pile of receipts to input into QuickBooks.  Waking up the middle of the night, wondering if that big client paid you on time.  Hoping that marketing campaign or coaching program will pay for itself.  Getting out your personal credit card to pay for a business expense, yet again.  Opening up a surprise tax bill from Uncle Sam. 

Is managing the fluctuating income and expenses of your small business an ongoing struggle for you?  It may be because you are falling for one of the classic mistakes small business owners make when dealing with the "numbers" side of their business.  More on How to Avoid the 4 Cash Flow Mistakes, part 1

Learn how to use Cash Flow Projections. 

A Cash Flow Projection is a chart containing educated guesses of your income and expenses, broken by month to month.  The expenses are projected in the months they actually occur — some of your expenses are the same each month (i.e., you internet fee and your loan payment) and some are occasional big expenses you must set aside money for, like your insurance premium or tax bill.  You create your income projections by taking an educated guess, based upon your marketing plans, your business history, and businesses similar to yours.  Yes, it's just a guess — but it's a place to start so you can measure your actual results against some projected numbers.    More on Want to Learn How to Predict the Future?

As your business starts to produce an income, how should that money be spent?  Invested back into the business, for growth?  On personal expenses?  When do you start paying yourself a salary?  When should you start your retirement plan?  More on Prioritizing Your Profits

If you've been an entrepreneur or small business owner, you've learned the dirty little secret.  Running a business is not about selling, or clients, or profits, or fancy business cards … it's all about cash flow. 

You may have the most brilliant idea or the best method of helping your clients, but if you run out of money tomorrow, you are doomed. 

How to you consistently and easily keep yourself above water? 

By using Money Meetings. 

More on Learn the Easy Way to Control Cash Flow

Do you want to fight less with your spouse about money?

Do you want to grow your business quickly, without having to look at the books more than the minimum necessary to get the job done? 

Whether you are the CFO of your family, your home business, or a Fortune-500, you must schedule a quarterly meeting with your board to analyze your finances and plan for the future.  More on Cash Flow Part 4: Your Quarterly Review

How do you reduce your stress about your money?

How do you save more money for your goals?

The secret is in the system.  More on Cash Flow Part 3: The Secret to Checking Your Money