A Simple Money Routine for Your Business's First Year

The first year of a business is full of loud tasks: finding clients, building a brand, learning your tools. Money admin is quiet by comparison, so it slips. Then, months later, you are staring at a bank statement and a shoebox of receipts, trying to remember what any of it was for.

You can avoid that without becoming an accountant. What you need is not a deep knowledge of accounting, but a small routine that you actually follow. This post lays out one that takes less than an hour a week.

What accounting is trying to tell you

Strip away the jargon and your books answer four plain questions:

1. How much money came in?
2. How much went out, and on what?
3. Who still owes me?
4. What is actually left for me?

If you can answer these four at any moment, you are in better shape than many people who have been in business for years. Everything else, the categories, the reports, the software, is a way to answer them faster.

Step one: give the business its own money

The single most useful thing you can do is stop mixing your personal spending with your business income. Open a separate account for the business, even if you are a one-person operation and even if it is the cheapest one available.

With a separate account, your business history writes itself. Every payment in is a client paying you. Every payment out is a business cost, or money you moved to yourself. There is nothing to sort out afterwards.

Then pay yourself on purpose. Move a fixed amount to your personal account at a regular time, rather than dipping into the business account whenever you need something. It turns your income from a mood into a salary.

Step two: choose when you count money

You have a basic choice. You can count a sale when the cash arrives, or when you earn it by doing the work and sending the bill.

The first is simpler and good enough for most small operators. The second shows a truer picture when clients pay late, because it keeps a record of money you have earned but not yet received. Whichever you pick, stay with it. Switching halfway through makes your numbers hard to compare.

Whatever you choose, still keep an eye on the unpaid invoices. Money that is owed but not received is not money you can spend. The reports in TickPaid show what you invoiced, what came in and what is outstanding or overdue, so this part is a glance and not a research project.

Step three: a weekly money hour

Pick one fixed slot each week. Friday afternoon works for many people. Do the same six things in the same order.

1. Send what is ready. Any finished work that has not been invoiced gets an invoice today.
2. Check who has paid. Mark paid invoices as paid.
3. Look at what is late. Make a short list of overdue invoices and decide who gets a nudge.
4. File the receipts. Photograph paper ones, forward emailed ones, and put each in one folder.
5. Tag the spending. Give each cost a simple label, such as software, travel, equipment or training.
6. Write down three numbers. Earned this month so far, owed to you, and cash in the account.

Forty minutes of this beats a whole weekend of panic once a quarter.

Step four: choose how you keep the records

There are three common ways to keep records, and none of them is wrong.

• A spreadsheet. Free and flexible. It works while you have few transactions, but it relies on you never skipping a week.
• Accounting software. It can pull in bank activity and reduce typing. It costs money and takes some setup.
• A person. A part-time bookkeeper or an accountant handles the details, and you handle the habit.

A reasonable path is to start with a spreadsheet and the weekly hour, then move to software or a person when the work starts costing you more time than it should. The habit comes with you either way.

Step five: put aside money for taxes and slow months

Income is not all yours. Part of every payment will go to taxes where you live, and part of it should cover the months when work is thin. Because the rules differ so much from place to place, ask a local accountant what you owe and when.

What you can do anywhere is move a fixed share of each payment into a separate pot the day it arrives. Pick a percentage that is clearly higher than you think you need. If you end up with extra, it is a pleasant surprise rather than a bill you cannot cover.

A made-up example

Imagine a freelance photographer, in her first year. She invoices a client 1,200 for a shoot. She sends the invoice the day she delivers the photos, and it is due in two weeks.

On Friday she checks her list and sees it was paid. She moves 25 percent into her tax pot, 10 percent into her slow-months pot, and leaves the rest in the business account. She pays herself her usual monthly amount from there.

Three weeks later, a different invoice for 800 is overdue. It appears on her Friday list, so she sends a polite message that same afternoon. Because she looks every week, nothing is overdue for more than seven days before she notices.

None of this is difficult. The difference is simply that she looks.

Common slip-ups in the first year

• Waiting to invoice. The longer you wait, the later you are paid. Invoice when the work is done.
• Treating revenue as profit. What a client pays you is not what you earn. Costs and taxes come out of it.
• Losing receipts. A cost you cannot prove is a cost you may not be able to claim.
• Skipping the routine in busy weeks. A busy week is when you earn the most and lose track the fastest.
• Doing it all in your head. Memory is not a bookkeeping system.

Where to go from here

Start with the separate account and the weekly hour. They cost almost nothing and they solve most early problems. You can learn the vocabulary of accounting slowly, as questions come up, but the routine is what keeps your business out of trouble. In a year you will have a clean record, an accountant who is happy to see you, and a clear idea of what your business is worth.