Trust Your Financials in 6 Easy Steps

accountability automation cash flow financial best practices financial statements planning process improvement taxes time management Sep 11, 2023
Trust your financials in 6 easy steps


[Listen to the Podcast version here]


Ever feel like you’re making things more complicated than they should be?

You are!

Managing your financial data doesn’t have to be time-consuming or stressful. With a little bit of work up front, you can knock off hours per month of accounting tasks and trust your financials to make business decisions!


Here is my 6 Step Process:


No. 1: Keep ‘Em Separated!

If you are mixing your business and personal transactions, you need to stop right now!

Have you heard the phrase “piercing the corporate veil”?

Owners of a business with legal entity status (LLC, LP, S-Corp, C-Corp, etc.) have limited liability which protects personal assets in case there is an issue with the business.

This only works if you can show that your business activities are truly separate from your personal activities.

If you are constantly mixing business and personal together, a judge could rule that there is no true separation, and your personal assets could be at risk.

Don’t take the risk of losing everything because it’s “too much of a hassle” to keep things separated.

There are rules to follow for each type of entity to take a distribution and/or pay yourself a salary to cover your personal expenses.

Follow them!

  1. Set up and maintain separate business bank and credit card accounts.
  2. Do not pay for personal expenses with a business account.
  3. Pay yourself according to the guidelines related to your entity type.


No. 2: Automate Routine Tasks

Software like QuickBooks allows you to connect most business accounts to your books to automatically import transactions for your review.

You can set up rules for recurring deposits and expenses to save time on coding transactions.

Ex: All transactions coming into a specific account (or all accounts) with the memo “Reliant Energy” will have the vendor “Reliant Energy” and account “Utilities” applied.

You can even choose to have transactions that are modified by rules to automatically post to your accounts.

I recommend not doing this as mistakes can happen, causing transactions to end up in the wrong account on your financials. It’s one less thing to worry about if you take a quick look to make sure the accounts are correct before posting the transactions.

Other items you may be able to automate:

  • Recording recurring credit card charges like subscription fees
  • Setting up recurring bill payments
  • Sending out monthly statements to your customers
  • Importing sales transactions and payment info from e-commerce sites like Amazon & eBay.

Depending on your business, the options are wide ranging, but this should give you a good idea of ways to save time and improve data accuracy all in one step!


No. 3: Timing is Everything!

What accounting method are you using?

Cash or accrual?

If you’re not sure, look at your last business tax return to see which box is checked. This will at least tell you how your CPA reported your financials.

Many businesses start out reporting on a cash basis and may choose to change to accrual or could be forced to by the IRS if they don’t meet the cash reporting requirements.

What’s the difference?

The cash method is like looking at your bank statement. Cash comes in and cash goes out. The transactions are recorded by your bank on the day the transaction happened regardless of when the related products or services were delivered.

The accrual method matches the revenue and expenses to the period they were earned/used. If you have accounts receivable or accounts payable instead of just recording the sale when cash comes in or recording the purchase when you actually paid it, then you are using the accrual method, at least in part.

Other items affected by the accrual method are things like paying for 12 months up front for insurance or software. Under accrual, you allocate the monthly cost over the 12 months instead of taking it all in the month you bought it.

If you know which method you are using, then you can be consistent in how you are posting transactions, so your financials don’t get messy. This will also save you money at tax time when your CPA has to review your books to prepare the return!

Bonus tip: Knowing your accounting method and using it to your advantage can also help reduce your tax burden because the timing of when you record the revenue and expenses determines when the profits are considered taxable.

If you want to know more about the pros and cons of using the cash or accrual method in your business, I have another article coming out soon that will dive deeper into this subject!


No. 4: Simplify your Chart of Accounts

One thing I don’t like about software like QuickBooks is that the standard chart of accounts that is suggested is bloated because it needs to be as generic as possible to meet the needs of its wide range of customers.

So, you end up with things like this:

  • Expenses
    • Travel Expenses
      • Airfare
      • Car Rentals
      • Fuel
      • Hotels
      • Parking & Tolls

Unless your business incurs heavy travel expenses, it probably isn’t worth the time and trouble to break down your travel expenses into a bunch of subcategories.

The more complicated your chart of accounts is, the more time it will take to code transactions and the more likely it is that something will get coded wrong, ruining the entire point of having a subcategory to begin with!

Keep it simple!

Don’t create a bunch of different accounts to track revenue and expenses in unless there is a true business case to see the data in that manner.

Also remember there are other ways to review your data (ex: creating custom reports or implementing class tracking).

If you have a bunch of accounts or subaccounts that you don’t use or want to remove, take the time to clean up your chart of accounts and inactivate the ones you don’t want anymore.


No. 5: Documentation

There are so many apps out there now that capture receipts, that there’s really no excuse to not have them.

Many companies give you the option to receive communications electronically, so you have the data in your inbox right away.

Create a workflow to send all of your financial documents (invoices, receipts, payment plans, etc.) to a shared inbox or server folder where they can be sorted and stored by your bookkeeper or assistant, so you have backup documentation for the transactions in your accounting software.

Remember that corporate veil I mentioned earlier?

This is another way to make sure you are protected and maintain your limited liability status.


No. 6: Make Your Tax Payments!

Setting aside money throughout the year for your taxes and making your estimated tax payments is critical!


Estimated tax payments are due as follows:

  • January 1 to March 31 – April 15
  • April 1 to May 31 – June 15
  • June 1 to August 31 - September 15
  • September 1 to December 31 – January 15 of the following year


While you do not have to make a payment every quarter, you do need to have paid in enough taxes by January 15th to avoid underpayment penalties.

Talk to your CPA about how to calculate your estimated tax payments.

More on estimated taxes here:


Implementing these 6 steps in your business will greatly reduce the amount of time it takes to prepare your monthly financials and allow you to have more confidence in your financial data.

If this still seems like a lot of work and you don’t have the bandwidth or team to support you, let’s chat!

If you’re using QuickBooks online to manage your financials, Harrington can help!


Here’s how it works:

  1. Book a free discovery call.
  2. We’ll discuss your situation and see if we’re a good fit to work together.
  3. Complete your bookkeeping assessment questionnaire. The assessment is used to determine the scope of any potential bookkeeping cleanup as well as the appropriate monthly accounting package.
  4. After the assessment, you’ll receive a proposal for the project with a full scope of work.
  5. Then it’s up to you!

Learn more about our services here.


Unleash Your Cash Flow Potential


Ready to see how the Cash Flow Ignition Method can turbocharge your cash flow and put you on the fast-track to success?

Learn how my method can help you:

  • Develop a clear picture of what success means for you
  • Make snappy, confident decisions that kick your cash flow into high gear
  • Run your operations like a well-oiled machine, no firefighting needed
  • Shift gears with ease as business needs change