C&T Q&A – How do you Track your Income and Expenditure? (+ Bonus FREE Spreadsheet Download)
This week’s question is from Liya:
I wanted to ask you if you could e-mail me a copy of the spreadsheet that you keep for your income and expenditure, as I’m new to this, will be eternally grateful if you think it’s not too much to ask!!
Many thanks in advance for your help!!
I’ve gotten a few requests like this, so I thought it might be a good idea to talk money here today. Specifically – how do you stay on top of your business income and expenditure so you don’t have a massive freak-out come tax time?
Okay, first of all? You should NOT be leaving this sort of stuff till tax time. If you’re serious about running a business, you NEED to know where your money is coming from – and where it’s going.
I know it’s a tedious task, and something we’d all rather avoid (and I’ll be completely honest here – I was SUPER-happy the day I handed this task off to Nick to take care of for me – he’s kept the books for at least 2 years now). However, I kept on top of it myself before that, and it was extremely worthwhile.
Money is Motivating
I don’t know about you… but I find keeping track of my biz money very, very motivating! I LOVE looking at my income at the end of each month, knowing that I made that money by sheer force of will – because every dollar I earn in my business I have WORKED for. Not like the old days where I got my salary in the bank every fortnight no matter how hard (or not) I worked at my job.
The more I earn, the brighter that happy glow of achievement burns. For me, that’s a super-motivating feeling!
I also need to know how much of that money we have actually kept – comparing the gross income each month to expenditure is the only way to know just how much money I have actually made.
Money In – Money Out = Money Kept
If you’re not tracking this on a regular basis, how on earth will you know how successful (or not) your business is?
Are you Running your Business into the Ground?
When we start off in this whole crazy caper, most of us are a little bit addicted to buying supplies. Come on, you’re among friends, you can admit it 😉
I dread to think how much money I spent at Spotlight in the bead section before I learned that there were better places to buy stuff from! If I go back and look at my income/expenditure for that very first year – when Epheriell was a hobby business that I ran in the down-time from my full-time job, I think I spent around $500 more than I earnt from it. At the time, I was pretty damn happy about that!
My only aim at this point was that the sales I made supported my ‘habit’. (Read, craft-supply-buying addiction…)
They did, and I was pleased… but I soon wanted MORE. And so the business turned from a hobby business into a ‘real’ business.
If I wasn’t tracking all of my expenses from the start, I wouldn’t know where I stood. I wouldn’t have had the confidence to grow my business, because I wouldn’t have had any idea how well I was doing.
Knowing where your money is going helps you to modify your business practices.
Maybe you need to cut back on buying supplies until you make a few more sales. Or maybe you’ve earnt more than you think, and you can re-invest that money into your business in the form of buying tools/materials or advertising!
It will also help you to avoid the pitfall of running your business into the ground by vastly over-estimating your income vs. your expenditure. There’s no way to really know where you stand unless you can see it in black and white.
An Example Spreadsheet (Free Download)
There are all sorts of fancy money-tracking programmes out there. To be frank – I’ve never used one because I don’t want to devote the time to learning, and the super-simple ones are always US based so don’t work with my Australian bank accounts (you know, those ‘automatically add paypal/bank income/expenses for you’ type programmes).
To this day, we just use a simple, straightforward spreadsheet to keep track of our business finances.
I thought I’d help you all out by creating a downloadable spreadsheet for you!
It includes an example page where I show you just how we use it, as well as all of the months of 2013, ready and waiting for you to just pop your numbers right in there.
As you can see, it doesn’t have to be complicated!
The hard part is keeping up with it regularly.
Don’t leave filling this in until the end of each month, or it will be an onerous task that you dread. Break it up into tiny pieces – make it a habit!
My advice is to fill it in at the end of each day – or, failing that – weekly at the absolute least.
- Download the spreadsheet above
- Spend time today getting this month up to speed. As I publish this it’s the 8th of February – so you’ve only got 8 days to catch up on for this month. Start there!
- Share your thoughts in the comments – do you use a similar system? Something different? Do you have any questions about this spreadsheet, or tracking finances in general?