Last week, I was thrilled to discuss business finances with the 2019 Class of the Arlington Chamber of Commerce Young Entrepreneur Academy, also known as YEA! In the YEA! Program, entrepreneurs grades 8-12, develop their ideas into robust business plans and launch their business. YEA! Entrepreneurs also pitch their business plans to an investor panel and compete for funding.
YEA! Entrepreneurs, like all business owners, need to know about planning and managing their finances. We only had an hour, so we covered three basic areas that support every entrepreneur’s success, regardless of age:
Separate Business Accounts and Financial Records
Open a separate business account soon as possible to avoid commingling personal and business funds. Apply for a business credit card to support cash flow needs and to avoid putting business expenses on your personal credit card. Establish separate financial records from records used to maintain your personal income and expenses. Separating personal and business finances gives you an isolated view of your business so you can better track your progress. Separate records also help to establish that you are operating business, not a hobby.
Track and Monitor Financial Activity
Keep a record of all business income and expenses up-to-date. Updated records allow you a clear view of your financial situation at any point in time. Expenses should be tracked by category, such as rent and advertising, so you know where your funds are going. No particular system or format is required for your financial records. The IRS just requires that financial records are accurate, complete, and provide enough detail to identify the underlying source documents. Produce and review monthly financial reports.
Adjust as Needed
A budget is a plan for your income and expenses, to prioritize your activities and provide a baseline to monitor your progress toward achieving your goals. Assess the significant variances between your monthly financial reports and your budget. Focus on the income and expense variances that relate to the most critical areas for achieving your business goals. Didn’t meet your budget? Don’t see it as a failure; see it as an opportunity to assess your plan, adjust your activities and try again.
My time discussing business finances with the 2019 Class of the Arlington Chamber of Commerce YEA! was fun. The YEA! Entrepreneurs asked sophisticated questions and shared experiences in their own business that I learned from. I’m so glad that the future business world is in these YEA! Entrepreneurs’ capable hands!