Organizing your business finances can be a challenge, whether you’re a new small business owner just starting out or growing your business. 

When Rosie Ferrero started her ecommerce business, Roupa Fashions, a boutique that curates designs and styles from around the world, she did something smart: she opened and used a business bank account. But she found that keeping all her money in one business account didn’t give her the insights she needed to make informed decisions about her finances. 

“Just because the money is in your account and for your business, doesn’t mean spend it on anything in your business,” she says. Now she divides her money into several accounts organized with a purpose in mind: 

“I have a marketing account, business inventory, business transportation and transactions,” she explains. “I find that keeping a clear balance of what my money is being spent on makes it easier to manage.” 

You don’t have to organize your finances like Ferrero does, but thinking through and implementing a system to organize your finances can make running your business a lot easier.  

Here we’ll share simple and effective ways to organize your business finances. 

Steps To Getting Your Finances Organized

Getting your business finances in order may seem overwhelming, especially if you’re not a numbers-oriented or detail-oriented person. That’s true whether you’re just getting started or have been operating for years. 

Here are a few places to start your finance organizing journey:

1. Create a business budget
2. Set up business accounts
3. Keep personal and business separate
4. Automate your business accounts

Each step will help you get a better understanding of your business finances and can help you stay organized moving forward. 

Create a Budget

Creating a budget allows you to plan for how much money your business plans to make from various sources, as well as how and where your business will spend money.

If you haven’t started your business yet, you can create a preliminary budget by creating a business plan.

The most common business expenses include:

• Payroll
• Employee benefits
• Wages paid to contractors
• Utilities
• Rent or mortgage payments
• Insurance
• Bank fees and interest
• Software and technology
• Supplies
• Raw materials
• Taxes
• Maintenance and repairs
• Marketing and advertising costs
• Depreciation and amortization
• Transportation and travel costs
• Training and development costs
• Equipment and machinery
• Legal and professional fees
• Startup costs (business registration, market research, product development, permits, licenses, trademarks, patents, professional services, etc.)

When you create your budget, it may help to categorize expenditures as “essential,” “important,” and “optional.”  If money is tight, this can help you quickly decide where your business needs to cut back. 

It’s also helpful to separate your expenses into one-time costs, recurring monthly costs, and annual costs. This will help you better understand when you’ll need cash to pay each expense. It also helps you understand which costs are fixed and which are variable.

Set up the Proper Business Accounts

Set up the proper business accounts for your business, and you’re off to a great start. 

The first place to start is with a business checking account that’s only used for business transactions. This will allow you to: 

• Review your cash flow and forecast for the future. It also makes tax time easier as your information is in one central place. With dedicated business accounts you won’t need to waste time sorting through transactions and you’ll be less likely to make accounting mistakes.
• Avoid certain liability issues. If you’ve chosen a business structure that grants personal protection from business debts and liabilities, mixing personal and business finances lead to an event where a creditor or other party is able to “pierce the corporate veil.” In other words, it could be grounds to hold you legally responsible for business debts and liabilities, despite having your business set up to protect you.
• Get business financing easier. When you apply for a small business loan or other business financing, many lenders will want to see business bank statements to verify business revenue. Having your business and personal accounts separate makes it much easier to get the documentation you need quickly.

Avoid Commingling Funds

Commingling funds occurs when a business owner uses their personal accounts to pay for business expenses, or vice versa. 

You can avoid commingling funds by: 

• Only paying business expenses with a business bank account, business credit card, or business debit card. 
• Only paying personal expenses from your personal finance accounts. 

When you need money from your business, pay yourself from your business account. Then use a personal credit card, debit card or other payment method to pay your personal bills. 

Pro tip: Here’s how to pay yourself as a business owner. 

Create a System To Keep Track of All Financial Activity

A business plan helps plan for how much money you expect to make, and from what sources. 

A budget helps you anticipate how and when your business will make money, and how you plan to spend it. To implement a budget, you’ll need a system to keep track of revenue and expenses. Tracking your financial activity helps you stay on budget.

The good news is it doesn’t have to be tedious. Automation tools make it easier than ever. In addition to your business bank account, here are tools to consider:

• Cash flow tracking. Link your business bank accounts to a tool like Nav Cash Flow Health to instantly see your cash flow along with projected forecasts. Stay on top of where your money is going. 
• Bookkeeping and accounting software: Tools like Quickbooks, Xero, Freshbooks, and Wave can help with tasks like tracking expenses and income, paying employees and contractors, tracking time, tracking mileage, maximizing tax deductions, capturing recipes, and more. Keeping your books up to date also makes it easier to produce financial statements like a balance sheet if you need it. 
• Invoice management: Your business makes money when customers pay you. If you work with other businesses, it may take time to get paid. Invoicing software makes it easier to invoice quickly and accurately, and follow up on unpaid invoices. It may also allow you to accept payment by credit card or ACH.

Cloud-based tools can be very convenient and efficient. You sign up online, create an account, and connect your business bank accounts and credit cards. From there, you can log in from a desktop computer or mobile device and all your information will be available 24/7.

Build Business Credit

Business credit is an important part of a well-rounded financial plan, especially if you’re planning on taking out financing to grow. Good business credit scores can help you get small business loans, along with more favorable payment terms from vendors and suppliers.

To establish business credit, you’ll need accounts that report to business credit bureaus. These can include net-30 vendor accounts, business credit cards, or tradelines. 

Ideally you’ll want to establish at least two to three credit accounts with companies that report. More tradelines may be helpful as your business grows.

Options include:

1. Suppliers and vendors 
2. Business loans and financing
3. Credit builder accounts
4. Business credit cards
5. Nav Prime

Personal credit is important too—especially for younger businesses or those that operate as sole proprietorships—so be sure to monitor your personal credit scores as well. 

Schedule Regular Financial Meetings and Reviews

Next, it’s important to check in on a regular basis to review your finances. For example, you may want to do a brief check-in at the end of each week and a full review at the end of each month. Quarterly and yearly check-ins can be a time to dig into what’s working and what’s not. 

During these check-ins you can:

• Ensure enough day-to-day cash flow to meet all of your financial obligations
• Identify areas where the business is overspending or may need to invest more
• Review profit or losses
• Make sure all tax obligations have been met
• Check inventory levels
• Compare your expenses to your budget to see if you’re on track
• Analyze financial trends to understand if business is heading in a positive direction
• Review whether accounts payable and receivables have been settled

By performing these regular reviews, you’ll be able to make informed business decisions on an ongoing basis. And you can notice and respond to any irregularities quickly.

Read: Must Do Checklist for Small Business Financial Checkup

Prepare for Taxes Year-Round

Taxes are perhaps the number one area that business owners struggle with when it comes to financial organization. 

Start by keeping your finances up to date with bookkeeping software. This doesn’t just help with taxes. It also keeps you in touch with your finances and allows you to make better financial decisions all year long. 

If you’re self-employed or earn non-wage income, you may need to make quarterly estimated tax payments. Set reminders for these due dates and regularly set aside money to cover these payments. This can help avoid the shock of a large tax bill at year’s end.

Throughout the year, keep track of potential tax deductions and credits. This includes business expenses, home office deductions, and industry-specific tax benefits. Create a system for organizing receipts and financial documents that aligns with tax categories. Again, staying organized can save you time and stress when it’s time to file.

Consider meeting with your tax professional mid-year to review your financial situation. They can help you plan ways to save money on your taxes and keep informed about changes in tax laws that might affect your business.

If you have employees, consider using an online payroll system. Payroll tax compliance is not easy to do yourself, and these services can ensure you file correctly and meet deadlines that are expensive to miss. They often generate W-2 forms for your employees in January, taking that task off your plate.

As the year ends, look into potential tax-saving moves. This might include making necessary business purchases or strategically timing income and expenses. (Make sure these decisions make sense for your business beyond just tax considerations.)

Whether you’re outsourcing your bookkeeping or using automated services, check in periodically to ensure everything is being entered correctly. Catching and correcting mistakes early prevents major issues from piling up before tax filing time.

By staying organized, informed, and proactive about taxes throughout the year, you’ll find the process less stressful and potentially more financially beneficial for your business.

How Nav Can Help

Entrepreneurs who try to make decisions about their business’s finances without any data to back them up are just guessing. 

As Nav member Fierro points out, “Your finances and being financially smart is what makes or breaks your business. In the long run, it’s what takes your business from small to big.”

Nav is a financial health platform specifically built for small business owners to track and improve business credit and cash flow health, alongside a marketplace of financial products for every stage of growth. 

With Nav Prime, small businesses unlock the most comprehensive toolset to build business credit, track cash flow, and manage financial health.