Financial Foundations You Need For Your Creative Business

You might own a business or maybe you want to start. Whatever the case, this post is for you. I'm talking about all the financial foundations you need to set yourself up for success. If you don’t have these five foundations set up yet, that’s ok. It’s never too late to start! Here we go:

1 | Business Set-up

I’ve said it before, and I’ll say it over and over again. But as a business owner you NEED to separate your business and personal finances. You’ve probably heard this before too but I continue to see it happen. If you’re getting ready to start your business, save yourself the trouble and get a separate biz account now.

Before we get into what type of accounts to use or where to bank, let’s back up and talk about LLCs. Disclaimer: I’m not a lawyer or anything, I’m talking about this from a bookkeeping/accounting perspective. Having an LLC matters because it protects your personal assets from your business assets. If you ever have a client sue you for whatever reason, they can’t come after your personal accounts. I always recommend my clients set up their LLC if they haven’t already. That being said, having an LLC or operating under your own name as a sole proprietor doesn’t change how your taxes are recorded. But again, an LLC protects YOU. Once you have your LLC you’ll want to apply for your EIN on irs.gov (it’s basically your social security number for your business).

Now that you have your LLC and EIN, you’re ready to open a business bank account. I recommend Relay Financial for your business banking. They’re all online, not in person. If you want an in-person bank I’d recommend Chase or Wells Fargo, however there’s sometimes fees associated with those. If you’re looking for a good business credit card, I highly recommend Chase for your banking as they have some great credit card options.

Once you have your account set up, there’s a 3-account system that I use and recommend to my clients. First, of course you want to have your checking account. That’s what I call your operating expense account, where money flows in (sales) and money flows out (expenses, subscriptions, etc). Second, you want a tax savings account. You want to set aside 20-30% for estimated taxes. Third, have a business savings account. Think of it as savings and emergency funds. I like to have three months of necessary expenses for your business to run (think: if covid happened again, you can keep your business going and you don’t have to completely shut down). That gives you peace of mind, and then you also can save and plan ahead for future investments like a coach, branding, etc.

2 | Protect Yourself With a Budget

Heyyy we’re going to talk about budgets. I like to call them projections, if “budgets” scare you and make you want to shut down. You might be thinking, “Ugh! She’s gonna tell me I can’t spend any money.” Hear me out: When I got married, I HATED budgeting. It was the worst thing. Over the last five years, I’ve learned to love it and here’s why. It’s not limiting me, it’s actually allowing me to spend. It allows you to spend what you’ve told yourself you can spend. YOU tell yourself what to do with your money. You project what comes in, and you get to decide and project what goes out. It gives yourself permission to spend within the guidelines that YOU set. Without those guidelines, chances are you’ll overspend and not see the profit margins that you want. If you want help getting started with a budget, we have a great template for personal and business budgets in our Marketplace.

3 | Prioritize Time for Bookkeeping

Set aside time each week and each month for you to do your finances and bookkeeping. This is something that I HAVE to do for myself, because it’s a lot easier to work on your clients’ work than your own 🤪 If I don’t schedule time for me to do my own books, it won’t get done. I’ll be doing the books for you or my other clients instead! What I do is have a day on my calendar every month where I do my bookkeeping, reconcile accounts, review my budget, etc. I call it a financial date with myself and make a whole thing of it, sometimes take myself to Starbucks or something. I also check in at the end of each week to make sure I’m keeping up-to-date on things and categorize transactions so I don’t have a ton to do at the end of the month. 

4 | Keep Track of Receipts 

I recommend keeping track of your receipts digitally. Even if you have a physical receipt, snap a picture or scan it and keep it digitally. I like to use Google Drive, you can use iCloud or wherever you keep things online. I have a folder for the year (2022), a folder for each month (September), and then upload all my receipts in that folder (Target, Sept 18, 2022). In Google Drive, you can take a photo within the app so you don’t even have to “upload” anything, which is really convenient. If you’re using gmail or Google workspace, you can also send an email to that folder. Even if you just have a folder in your inbox for receipts, have a system for keeping track of them (and keep it simple).

5 | Have a System to Pay Yourself

If you’re just starting out and going month to month, and not rewarding yourself for your time and energy, you’re going to get burnt out. Even if it’s just $100-200, $4,000, whatever it is. Pay yourself. Because you’re part of your business and you’re working hard for that! Have a system too, I recommend Profit First as a good business book. Pay yourself first, then use what’s left as your operating expenses. I know for me, if I don’t pay myself first then it’s easy to fall into spending with the excuse that it’s a tax deduction. Then you end up spending all this money and can’t bring any home at the end of the month. I have a method that I teach my clients (stay tuned for a future episode), but put simply have a percentage of flat rate of your sales that you pay yourself. 

There you have it! Complete these five steps and you’ve made it through Financial Foundations 101. Here’s to success in your creative business! 🥂