Episode 49: Financial Steps to Take When Starting Your Business

  📍 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.

 You are listening to the Creative Mind Smart Money podcast, and today this is an episode for pure Beginners. So if you’re not a beginner, this might not be super helpful for you, but it might also be very helpful for you ’cause it could help you identify areas where you might not have thought about doing certain things.

So let’s talk about where to start. This is a question I’ve been getting a lot when I go onto other podcasts or talk to people’s audiences is. What is your best advice for when someone is just beginning? Like, what do people do if they’re brand new? They don’t know where to start. They’re intimidated by money.

Like how do we help them with that? So there’s, and I wanted to make this a very specific episode, talking about what to do if you’re just at the start of your business and you have no idea what to do with finances, but you really wanna just get into it. So first of all, I wanna just normalize this because nobody starts a business already knowing this stuff.

It’s not taught in school. Education isn’t widely available on it. It’s just, it’s not something that we know. And so it’s okay. It’s okay to not know it. Most creative entrepreneurs don’t really like numbers. They like creating and that’s totally okay as well. The whole point of this is that it’s helping you understand them, so that you can grow your business in a meaningful way, and the goal isn’t to have perfect.

Numbers or a perfect business. It’s about giving you the clarity and confidence that you need to grow your business with intention so that you can make better financial decisions. So if you’re someone who’s been avoiding your money because it feels overwhelming or like it’s like the monster in your closet, you’re in the right place because that’s what we’re gonna talk through today is how we get over this feeling of avoidance, how we get over this feeling of anxiety we have when we think about our money.

So the first step we’re gonna talk about is separating your money. Now I have a whole episode on why it’s very important to separate business and personal, but it, like I said in that episode, it really is a non-negotiable. You need to open a dedicated business checking account, even if you’re a sole proprietor and have the two separated.

It’s not just for the sake of keeping them separate for legality reasons, it’s for the sake of keeping it separate because it gives you really clean bookkeeping. When you start mixing personal data in there, it throws your numbers completely out of whack and you don’t get to understand the full picture of your business.

So when you use that dedicated. Checking account and you have a separate debit card or credit card for business expenses. It just gives you clarity and confidence in your numbers. It’ll give you peace of mind. It’ll help you smooth tax season and really just get to where you need to be.

There are loads of online free business banks, and I’m not gonna talk about which ones, because again, there’s an episode at the very beginning of this podcast that talks about the best business banks for you and your business. So go check that out if you really wanna talk about banks, but start with a business bank account and label the accounts so that you know which one is the card that you need to use. In fact, I always tell this to a lot of my clients, don’t carry your business debit card with you to stores. Because I’ve seen it many times where people will say, oh, I accidentally swiped my other card. Don’t bring it with you. Just don’t even give yourself that temptation.

Leave it at home. So that is your first step. Separate your money and keep it separate. Non-negotiable business and personal needs to just be separated.

The second thing we need to do is track our income and expenses. Even if you’re not profitable yet, even if you’re not making money, start tracking now whether you’re tracking in a spreadsheet, whether you’re tracking in an accounting software, whether you hire a bookkeeper, I would never advise you to hire a bookkeeper right when you first start your business, especially if you don’t have a lot of money.

’cause usually bookkeepers don’t come cheap. And I also wanna advise that a spreadsheet is a perfect place to start. There are so many bookkeepers or accountants out there who are like, oh, don’t ever use this spreadsheet. But if you’re a really basic business and you’re like a service provider or just a basic product based business, and you are just starting out, like a spreadsheet is perfect, a spreadsheet is absolutely fine.

Especially if you just wanna record things and understand things that are going in and outta your business. Now, once your business starts to get more complex, you start hiring. You have so many transactions. You have software, you have everything. Yes, you need an accounting software, 110%. But when you’re very, very first just starting, you’re not making a lot of money.

A spreadsheet works just fine, but you need to start tracking it from the beginning. Don’t wait. Don’t wait to track it. Understand what’s coming in and out of your business. Look at it. Track what’s coming in, what’s going out. Categorize it. Look at say, okay, so this is a marketing transaction. This is a software transaction.

Just understand what’s coming in and outta your business so that you can plan appropriately.

Don’t wait until tax season to figure it out. Start building that habit from the beginning so that you have a healthy habit of looking at your numbers. And I’ve said this before, but even if you have a bookkeeper, you should still be looking at your numbers and looking at the data because it’s very important that you as a business owner also understand what’s going on and can take those actionable steps to move forward.

’cause I can’t make the decisions in your business. I can advise you on things. Absolutely. But I’m not the one making the decisions. You are.

And I say this all the time, your numbers tell a story. So why not start reading it from the beginning instead of picking it up in the middle and then getting really confused when your numbers don’t make a whole lot of sense.

The next step is to set aside money for taxes. Now, I know this seems very obvious and you’re like, Samantha, like, why would I not set aside money for taxes? But there are so many people who don’t, taxes are not optional, and they’re not just once a year, especially if you owe more than a thousand dollars. If you owe more than than a thousand dollars, you’re gonna have to pay quarterly. And before we deep dive into that, again, I have an episode on quarterly taxes. I wanna remind you, quarterly taxes does not mean that you’re paying double when it comes to tax season.

If you have paid, you know that 20 to 30% every quarter. You will only owe the last 20 to 30% at the end of the year. So you’re literally just paying your tax bill in chunks instead of paying it all at the end of the year. So if you have a $12,000 tax bill, you’re paying $3,000 every quarter instead of paying $12,000 at the end of the year.

The rule of thumb is to set aside 20 to 30% of your profit for taxes and profit is everything that comes after all of your expenses are taken out. So it’s not your top line revenue. It is after all your expenses are taken out because. Your expenses are deductibles, right? So you wanna only be giving the IRS like what comes out of your profit, and then of course, open a separate savings account and move money weekly or monthly into that tax savings account so that you’re not touching it.

Because there’s so many people I see that are like, I’ll just leave it in my mean account or whatever, and then you overspend or something like that. Again, that’s where we need those apps, like YNAB, like I’m always talking about.

And then of course your estimated taxes may be required, but that’s why we plan for it and we analyze it and we understand it. And usually if you’re working with a bookkeeper or a CPA, they’ll be able to tell you if you need to pay estimated taxes, because even if you don’t owe this year, it’s better to have a cushion that you saved up for taxes than some sort of surprise bill at the end of the year saying like, Hey, you owe 12 grand and you don’t have that 12 grand.

Of course your future self will thank you. When April rolls around and you are not scrambling, you’re just completely prepared for it. I’ve seen it all the time, and right now as I’m filming this, it’s April 17th, so it’s a couple days after tax season where everybody’s panicking being like, I paid money to the Rs.

The money you’re paying to the IRS is the money that you are putting into Medicare and Social Security. So if you wanna be able to take from Social Security when you retire years from now, you have to pay some sort of funding into that. And that’s exactly what you’re paying. Like, yes, you’re paying taxes because you owe income tax, but you’re also paying.

You know, social security, the Medicare, so don’t think of it as a negative. Also, think of it as like you made money that year. A lot of people look at taxes in such a negative way, and they’re so like, oh my gosh, I pay taxes. Taxes shouldn’t come as a surprise. If you’re working with a bookkeeper, you’re working with a CPA, it shouldn’t be a surprise.

You should be fully prepared, know what you need to pay and be prepared for it. Every year. There shouldn’t be some sort of like surprise, like, oh crap, like I owe 13 grand. It happens. Taxes are normal. I know nobody wants to pay taxes, but they’re normal.

The next thing I wanna talk about is paying yourself, even if it’s small, don’t let your business drain. You start building a habit of owner pay.

The way I like to explain this is reverse engineering it. So you know that you need to bring in $3,000 for your family. You know that you wanna set aside another $2,000 in a reserve fund so that you can reinvest in your business. And you know that your expenses are usually around $2,000. So you know that you need to bring in $7,000 , a month in order to get all of that.

What I would do is take a percentage of that. So to make this easier, let’s just move it to 10,000. And let’s say you need 3000. So you need to set aside 30%. So start taking 30% of everything you bring in and pay yourself that. Pay it out of profit. Even if it’s just small. Pay yourself that 30% because it creates separation and helps you to give yourself that respect and sustainability that you need to grow your business.

’cause if you’re not paying yourself, you’re gonna burn out. Again. I have episodes on all of this. So please make sure to go through the backlog and check it out if you want more details on this. This is really just a high level overview because your owner’s pay is gonna motivate you and keep you consistent because even with a small paycheck, it, your brain is gonna say, okay, my business is supporting me.

So it’s not about how much, it’s about just starting that pattern and starting, like I said, if you’re using that percentage, you’re gonna really understand and be able to be like, okay, I’m setting aside. This much. And then of course, creating a basic budget for your business. And if you’re like, I don’t know what budgeting app to use, we have a whole episode on YNAB.

We have some episodes, on budgeting as well. But plan for your money, and don’t make it a punishment. Just plan for it. Understand what your basic subscription or like expenses are, subscriptions, tools, coaching, whatever it is, understand what’s coming in and out of your business on a monthly basis.

And then of course, you can analyze what you need to bring in. So if you know that you have $500 in subscriptions, you need to at least bring in $500 to break even on that. And then of course, review that monthly to see like what came in and how you feel about it.

The final step I wanna talk about is know when to ask for help. You don’t have to do everything alone, especially not your books, especially if you hate numbers, you just don’t understand them. You don’t know what’s going on in your business. A bookkeeper can actually help you with more than categorizing.

They can help you understand your numbers so you don’t have to second guess. So you can fully like break into your business and not doubt anything. And when it’s time to outsource an invest, you’re just gonna know. You’re gonna know that your business is gonna get to the stage where you can’t sustainably grow your business on your own anymore.

And you’re gonna look at that and you’re gonna say, I need someone to come in and explain this to me. I just don’t understand. I don’t understand what’s trying to tell me. I don’t understand what’s going on in my business. And that’s when you really know. Because trust me, the financial support team that you hire when eventually you do hire is your secret weapon for confident growth.

And I’m a firm believer that every business owner needs a bookkeeper. And if you’ve been a bookkeeper in the past and you’re like, yeah, I can do it, that’s great. But I, I do think that it comes to a point where you are focusing on so many different things that your bookkeeping is either gonna get left behind or it’s not gonna get enough attention.

And that’s when you know that you’re really gonna need help. Again, I have a whole episode based on when you know you need a bookkeeper. So all of these are deeper episodes that you can get in, but this is just the highlights of what you should do when you’re just starting.

📍 The best time to start building those strong financial habits is before anything gets messy. So I want you to start small. I want you to stay consistent, and your future business will be built on the habits that you start today. If you found this episode helpful, please rate and review the show and share this with a friend.

As always, if you have any suggestions, please make sure to fill out the form in the show notes that you can suggest topics you’d like to see on the podcast. Otherwise, I wish you all the best and we’ll see you next week. Farewell fellow Travelers.