đź“ž Book a small business advising call here.


Deep Dive: Managing your Small Business’ Finances

Deep Dive: Managing your Small Business’ Finances

graphic of ppll with a bank vault

Deep Dive: Managing your Small Business' Finances

Hello, WISE friends. Welcome to the August edition of WISE WBC’s Deep Dive, where we go into the nitty gritty of a topic of interest to small business owners. The theme of this month is financial management, so important to the success of any small business.

Dive deep into financial management

The heart of financial management is sound bookkeeping. Bookkeeping is simply the records of your business’s financial transactions, a way of tracking both income and expenses. Without updated and reliable books, you cannot pass go, you cannot collect $200. Or any dollars, really. 

First, you’ll probably need to bring in someone to help you get set up, either an accountant or a bookkeeper. Together, you’ll decide on an accounting system - cash or accrual, and choose accounting software, like Quickbooks, Freshbooks, or Wave Financial. You’ll then set up your chart of accounts -- the list of accounts that you’ll use to categorize your expenses and income, which is customized to your specific business. 

Once you’re all set up, you can connect your bank accounts, credit cards, and the like to auto-import, then go through and update your general ledger, which you do by categorizing your past transactions according to your chart of accounts. This is a step many business owners put off, but it is absolutely crucial. Investing the time to keep your books up to date ensures you have reliable information to work with.

Next, you’ll create a budget for your business. This should include targets for your expenses for all major categories, like salaries, rent, gear, utilities, and more, as well as goals for your different income sources. Set reasonable goals based on your past needs, then monitor at least monthly to see how your actuals compare to your budget goals. 

Then, it’s time to get hands-on with your financial statements: 

  • Profit and loss (also called the income statement): your profit and loss for whatever time period you choose, including revenue coming in and expenses going out.
  • Balance sheet: a snapshot of what you own and owe at the current moment, including cash, assets, and liabilities like debt.
  • Cash flow statement: the flow of cash into and out of your business, from sales and purchases, financing like from a loan, and investments into assets. 

Any good accounting software can create them for you - go to the reporting section, select a time range to look at, and voilà. With those in hand, get up to speed on how to read and truly understand your statements. It’s not enough to glance at them - to gain valuable insights into your business’s finances, you really need to dig in. As you do, create a plan to turn insight into action.

With the financial statements under your belt, you can go on to create a financial forecast. A forecast is a best-guess prediction of what the future will look like financially. You can model any scenario, like what the next year will look like if sales remain steady but your expenses increase, what it would mean financially to bring on a new team member, or how it’d impact your finances if you launched a new service. 

You can create one using a spreadsheet, a program like LivePlan, or any number of templates available online (SCORE has a detailed one here). This is a pretty involved process, so consider getting support from one of our business counselors. They can get you 3 months of free access to LivePlan, too, which is a great way to do your forecast. 

At this point, you’ll have a new small business superpower: the ability to act strategically to improve your business’s finances. This skill is invaluable and will make it much more likely that your business will survive and thrive. The final step? Make it a habit! Like with any kind of health — physical, mental, financial — the key is routine. As a baseline, you should be updating your general ledger (categorizing your transactions) once every week. Then, at least once a month:

  • Compare your actuals to your budget
  • Run your three financial statements and analyze them
  • Make an action plan for the month ahead
  • Pat yourself on the back for being on top of your business finances

Read, watch, listen

Ready to learn more? Check out the links below.


If you need support as you learn to engage with your finances, get in touch with us at WISE. We can answer one-off questions, set you up for counseling, let you know about relevant training and courses, or recommend financial professionals. 

Thanks for reading, and let us know what other topics we should cover for future Deep Dives!