Finance

Overview

There are a few core finance tools and activities for any small business. These are listed in general order of priority below, but they can be completed in whatever order makes sense for your business.

• QuickBooks Online (QBO): your business should have a financial accounting software to help manage your books. QBO is the best solution for small businesses. Read more and checkout pricing here.

• Chart of Accounts (COA): this is how your finances are categorized and should be setup in accordance with your business needs. For example, you may want to track profitability per revenue stream, or you may want to consolidate specific things under Marketing expenses rather than Sales expenses. This is an accounting exercise every small business should walk through. Read more here.

• Budget: setting a budget is critical for managing your business. This budget is based on a sales forecast. By creating a sales forecast and the anticipated expenses to drive that forecasted revenue, you will have a budget plan that you can measure against. It’s not going to be perfect, and you may need to re-budget after a quarter or a half year. If you’re already using QuickBooks, you can create a budget template right out of your QuickBooks account based on your existing COA and upload your budget so you can report directly out of QuickBooks. Read more about budgeting here and how to create your budget in QuickBooks here.

• Cash Flow Statement (CF): as a small business, your cash flow is arguably the most important financial tool since cash is king. This tool will track actual cash movements in and out of your bank account. You can tie this together with your budget to build a cash flow actual vs forecast tool to help you anticipate cash crunches and plan out larger expenditures.

• Profit & Loss statement (P&L): this can be reported directly out of your accounting system (e.g. QuickBooks). It tracks your sales and expenses throughout the year so you can understand how your business is performning. Take caution that your P&L could indicate that your business is profitable, but if you don’t manage your cash flow your business may suffer.

• Balance Sheet (BS): this can also be reported directly out of your accounting system and indicates your overall business health in terms of your asssets versus liabilities.

• Fathom is a reporting tool that links directly to your QBO account and provides insightful analytics. It can also be used to create custom KPIs for reporting purposes. You should be closing your books on a monthly basis to understand how your business is doing and be able to make informed business decisions. Read more here.