Episode 94: The Financial Foundation That Sets Your Creative Business Up to Last

Welcome to the Creative Minds Smart Money Podcast, where we turn financial confusion into creative confidence. I’m Samantha Eck, bookkeeper and fractional CFO for creative entrepreneurs. Each week, I’m sharing my financial expertise and actionable strategies to help you build a thriving creative business. Plus, you’ll hear from industry experts who bring fresh perspectives on growing your business beyond the numbers. Because building a successful creative business starts with strong financial foundations.

Your next chapter starts now.

Hello, hello, hello, friends. Today we’re going back to some basics and asking ourselves what a healthy business financial setup looks like from scratch. So when you start your business, what do we really need to be looking at — what do we really need to be setting up so that we can have a really good financial seed so that your business can sprout and grow and just become something so extraordinary and so beautiful?

When I first started my business — and I’ll actually throw this back to even just my creative businesses — I didn’t have any of this stuff set up. When I set up my bookkeeping business, I had taken a course, so there was a whole bunch of advice on what to set up. First things first, I did make sure I got a business bank account. I think my very first business bank was Blue Vine, if I’m not wrong. It wasn’t anything crazy. It was just a business bank account. I got my QuickBooks set up and I made sure that I got all of my startup costs in there via journal entries to make sure I actually had all that recorded before I forgot about it. Because there are too many times where when we start our business, we forget about all the costs we fronted ourselves that are not in a business account, that are not calculated for us, that we need to actually account for and consider as business expenses. The cost to set up your LLC, if you paid for that out of pocket, is still a business expense. It’s just a matter of how you actually get it recorded.

Most creatives, when they are first setting up their business, completely skip the bank account part. They don’t have any sort of accounting software and they don’t really consider any sort of financial setup to begin with. They just get started. They set up Etsy, they get started creating, they get started selling, and then all of a sudden their money is funneling into their personal account. Now they can’t tell the difference between what is business funds and what is personal funds. Same thing with Amazon — maybe they’ll start purchasing things through Amazon for their business, but they also purchase personal things through Amazon. Now they can’t tell what’s a business expense versus what’s personal. So even having a separate business Amazon account is very important, or just having some way of separating the two, whether that’s downloading receipts or whatever.

So the foundation — when we first get started with our business, what do we need to set up? What needs to be done immediately? Immediately open a business bank account. It doesn’t matter where. And honestly, I’ve had episodes on this before, so I’m not going to go into too many details. But I do want to advise you that it does not have to be at your current bank. It can be something free that you open just to start tracking your income and having a place for it. Then if you want to open a different account later, you totally can. There are tons of free online business banks out there — like Bluevine, Relay, Novo, Mercury. There are so many. Explore your options, open a bank account. It takes 10 seconds. Then you have a way to track your income and expenses.

Will you be spending money from your personal account for a while? Absolutely, because until you bring in money, there’s not really any space to do otherwise. You can, of course, deposit money into your business account as spending money — let’s say $1,000 — and then put all your expenses in there. That’s totally fine. That’s an owner’s contribution. I’ve seen so many people do it that way. It’s completely natural when you’re in the startup phase to spend money from your personal account on your business. So first things first: get a bank account set up.

And it’s so important to separate business and personal immediately from the get-go. I know some of you might be thinking, Samantha, you’ve talked about this so much. But it really is that important. If you have an Amazon order every single day and you start adding business orders on top of that — boxes, supplies, whatever — imagine at the end of the year having to sift through thousands of Amazon transactions to figure out what was business and what was personal. Imagine that stress during tax season, when it could have taken 10 seconds to separate them at the start. You could also be missing out on deductible expenses. And are you going to remember seven, eight, nine, ten months down the road if that trip to Walmart was for the business or for yourself? Whether that coffee was a networking meeting or just for you? Because if it’s a meeting, it’s deductible. If it’s just yourself, it’s not — the IRS has very strict rules around that.

I just want to make sure that when you get to that point, you have all those deductible expenses listed, but also a realistic picture of whether your business is actually successful. Because if you’re spending thousands in your personal account on your business and not accounting for it anywhere, you’re never going to know if your business is actually working.

Okay, so how many bank accounts does a business need? Realistically, I’d recommend either two or three. Not more than that. I understand Profit First has five. I’ve mentioned this before, but I’m very anti-Profit First. There are a lot of accountants who live and die by it. I tried it myself. I cannot handle it, and I don’t recommend it. Having that many accounts to reconcile is a nightmare — for me as an accountant and definitely for you doing it on your own. I’m not saying it’s a bad system. It works for some people. But if a system doesn’t work for someone’s brain, it doesn’t work. Every person is different. And that’s okay. There’s a system for everybody.

Personally, I think you need three bank accounts. First, a main operating account — this is where all your expenses come out and where your income flows in. Subscriptions, payments to your bookkeeper, payments to contractors — all of it. Second, a separate tax account. When income comes in, you have an automation set up that automatically moves 20% into that account. You don’t even see it. It’s just gone, sitting in your tax account. When quarterly taxes come around, you pay them and you’re done. You don’t need to worry. And if you end up overpaying — maybe your partner has a W-2 job and covered more in taxes than you needed — then you get a refund. Either way, you already set the money aside and you’re not owing at the end of the year. The third account is a savings account, just a general emergency fund. Setting aside $1,000, $2,000, three months’ worth of expenses — something to fall back on if you have a slow month or an unexpected expense.

Those are the three accounts. I really don’t think one account works. There are too many business owners who see $15,000 in their account and spend it, not realizing that $5,000 of that needed to go to taxes. Having separate accounts helps you know what money is actually yours to use.

So banking is one step, but then your next natural step is bookkeeping and making sure you’re actually tracking everything. A lot of people ask when they need to start tracking. The answer is immediately. Whether it’s a spreadsheet, a free accounting software like Wave, or just a simple document — start tracking. I would suggest at minimum a basic spreadsheet with your expenses, who you paid, what it was for, and how much. Same for income. Do not overcomplicate this. When you’re just getting started, there’s not a lot of bookkeeping to be done, but you need to be tracking so that when there is a lot to account for later, you have the data. Keep it simple. Keep it easy. Just make sure it’s something your brain can actually stick with.

Now, what does a proper owner’s pay setup look like? Because you also want to make sure you’re actually paying yourself. You don’t want to just funnel all your money back into the business indefinitely — that’s a fast track to burnout. I always tell my clients to work backwards. Figure out how much you need to survive. Maybe you have a partner who covers a lot and you only need $500 a month to start. If you have a $1,000-a-month client, now you know you have $500 left for expenses. If $200 goes to software, you’ve got $300 for everything else. Knowing that number helps you plan.

And paying yourself is so simple. You do not need to write yourself a check. You can literally just transfer money to yourself — ACH, Zelle, whatever works. So many people skip this step and six months later they’re wondering what they’re even doing it for. You started this business to bring in money. Paying yourself is part of honoring that.

Okay, our last topic: taxes. Setting aside money for taxes in a dedicated account is important, but so is understanding what to actually set aside. I usually tell my clients to set aside 30%. Most of them end up getting refunds because 30% tends to be more than they actually owe — especially if you’re in a state like Texas with no state income tax. But getting a refund beats owing money in April. Find what feels comfortable to you. If 20% works, do that. If you’d rather over-save and get money back, do 30%.

And one thing I really want you to hear: quarterly taxes are not extra taxes. If you owe $20,000 for the year and you’ve paid $19,000 in quarterly payments, you only owe $1,000 in April. You’re not paying again on top of everything. Quarterly payments just mean the IRS is getting their money throughout the year instead of waiting until April, and they penalize you if you don’t pay that way. That’s all it is.

So maybe you’re listening to this and you already have a business and you realize you skipped half of this. Breathe. First step: get a business bank account if you don’t have one. Separate your business from personal — that’s the most important thing you can do right now. If you already have an account but no accounting system, start a spreadsheet. Keep it simple. Write down who you’re paying and what you’re getting paid for. If you’re not paying yourself, figure out your minimum and work backwards. If you haven’t been setting aside for taxes, start today.

If you didn’t set this up from the start, that doesn’t make you financially unhealthy. It just means you need to get those systems in place now so that down the road, your business is much more solid.

If you guys love this episode, please like it, share it, subscribe, and share it on social media so we can get more ears on it. And if you have a topic suggestion, feel free to message me on Instagram or Threads. As always, I wish you the best week ever. I’ll see you next week.

Farewell, fellow travelers.