Oh... Financials! Have you put a plan in place?
If you're not a numbers guy or woman, Financials can seem like a daunting task to engage in. I know it is for me.
I always tell people that I went to law school to avoid math! Hahaha. But, really... You can't escape it. If you are currently in business or contemplating starting your own entrepreneurial journey, you have to start with the numbers!
HOW DO I FIGURE OUT MY NUMBERS?
It's easier than you may think. Your numbers will begin with a budget for your personal income and expenses.
Most entrepreneurs and business owners create start-ups by using their own cash flow which may come from family or a job. Therefore, when you set out a budget for your personal income and expenses, you'll start to create a financial map that will show you what you can live without, what you probably over spend on, and where any extra cash flow can go into your new business.
WHAT SHOULD MY BUDGET CONSIST OF?
Great question. Budgets will vary based on person and household size. For instance, if you are a married person, your budget may consist of both you and your spouse's income and expenses or it could include just your income and expenses if you split things equally in the household. If you are single, it will only include your income and expenses.
START-UPS
For example, you'll want to account for the following:
INCOME:
Income - primarily 9a-5p income.
Side-gigs - 1099 income
Donations/Support
EXPENSE:
Mortgage/Rent
Food
Transportation/Gas
Parking
Meals/Entertainment
CPA/Accountant
Insurance Plans (Medical)
Car Payment
Car Insurance
Child(ren) * May want to list out monthly expenses for child.
DIFFERENCE: subtract what your income is after deducting your expenses. What you have left over illustrates what your financial allotment is.
BUSINESS OWNERS
If you are already in business and trying to further understand your numbers and how to create a road map to be successful, then your budget may consist of the following:
INCOME:
Income - primarily 9a-5p income.
Side-gigs - 1099 income
Donations/Support
EXPENSE: (PERSONAL)
Mortgage/Rent
Food
Transportation/Gas
Parking
Meals/Entertainment
CPA/Accountant
Insurance Plans (Medical)
Car Payment
Car Insurance
Child(ren) * May want to list out monthly expenses for child.
EXPENSE: (BUSINESS)
Rent - office space * (Note: If you have a separate work location, this full amount can be deducted on your tax. If you work from home, you can only deduct a portion of your rent/mortgage as a home office deduction on taxes)
Travel
Gas
Parking
Meals/Entertainment
CPA/Accountant
Financial Agent
Lawyer
Insurance Plans (Medical)
Insurance (Business)
Car Payment (Note: if you use your car for business purposes, you should be able to deduct the depreciation).
Car Insurance
Phone (Work Number only)
Phone (Cell - if you take business calls - can deduct usually 50%, but depends on the tax rate each year).
Contracting Work
Employee Expenses
Office Software
Website/Domain/Email Hosting
Advertisements
Branding
Events Expense
Professional Fees/Subscriptions
Professional Books/Resources
Office Supplies
Once you perform a calculation based on your income and expenses, you'll see whether you have operated at a loss or at profit for the year.
Business owners, you'll want to create your plan but looking at what your profit and expense numbers were every month.
Therefore, you'll need to run reports monthly to understand "Am I over spending on some things, or is there anything I can cut back on?"
When you find the excess in your expenses, you'll be able to allocate that to something your business truly needs or invest that in a software or services that will help boost your business to the next level so that you can start operating with income.
At SLD, we help our business clients to create a financial road map so they understand their numbers. This is something that I did and do for my business so I can fully understand where I was and where I want to be.
It makes a difference when you can truly SEE your goals playing out before your eyes. Are you ready to understand your numbers for 2020? Call us today to schedule your consultation!
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This article is a service of SL DeBarros Law Firm, LLC. We offer a wide array of business legal services and can help you make the wisest business choices throughout life and in the event of your death. We also offer a Business Protection Start-Up Session or a Business Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule.
