Let me ask you something, why did you start your coaching business? Was it to create something wonderful that was all yours? Something that could potentially allow you to have a lifestyle you have always desired? Or was it so you could take advantage of the system, with tax breaks, corporate accounts, and discounts? You cannot achieve your business goals without adopting any financial rules!
Stop treating your business like it’s a regular bank account. Mindset is a huge part of your success; if you keep thinking of your business as a never-ending bottomless bank account, you will never be successful. You know what I am talking about: the “I’ll just write it off as an expense” conversations you have with yourself, and the “I didn’t pay myself so this will count as wages” purchases you make. Please stop it.
Your business deserves to be treated respectfully and it needs you to have the right attitude towards it. This is especially when it comes to financial matters. You know the old adage, “you get out what you put in?” Well, this totally applies to your business financials.
Here is a list of financial rules for coached to live by. They will hep you create a healthy bank balance, and a healthy attitude towards finance.
Do pay yourself a wage
To start with, figure out how much you need on a weekly, bi-weekly or monthly basis. Then set this up as an automatic transfer if you are not incorporated, and take ONLY this amount for yourself. If you are currently not making enough money to cover what you need for a wage, either re-look at what you are taking out, or increase your sales. But stick to the same amount every time so you can start to budget business expenses.
Do get a business credit card
If you don’t qualify for a business card, use a dedicated personal one. This could be the simplest of the financial rules and yet makes reconciliation much easier!
Do take advantage of all tax credits available to you as a small business owner
But make sure you have the receipts to back everything up and that you are deducting correctly, vehicle expenses, for instance, include interest on a loan that you bought your vehicle with, but only the percentage amount that you used the vehicle for business reasons and you have to be able to prove this with mileage logs.
Do set budgets for areas of your business so that you don’t overspend
It’s very easy, especially early on to buy all kinds of equipment, stationery items, and non-essentials. However, it is important to understand if you really need those items at this particular point in time. I often hear – “I’ll just write it off as a business expense” – that’s fine, but you still have to pay for it! Set budgets for your cost of goods/services, wages, and operating expenses. This exercise will also help you understand the bare minimum you need in sales to cover those expenses.
Do know your numbers!
You should have a good grasp on what your averages are for income, expenses, and COG at the very least
Do be aware of how many monthly transactions you are conducting
Banks charge fees based on the number of transactions conducted each month, so cutting down on some of those non-essential debit purchase can help lower bank fees. Also, making the purchases on your credit card and then one transaction per month from your bank to your credit card will also help.
Do pay for subscriptions and re-occurring expenses on your credit card where possible
Things like your phone bill will help you rack up points on your credit card if you have that available. They will also cut down on transactions in your bank account.
Do keep track of your business mileage
You may think you don’t use your vehicle very much and the thought of tracking it all makes it not worth it, but with apps like MileIQ it becomes a breeze and you will be surprised how often you run out for supplies or nip to the bank!
Do not make non-business purchases on your business credit card
I don’t care if it earns you extra rewards or points when you use that card for all your purchases, the mess you get into with reconciliation and then trying to figure out how much you now owe the company is not worth the extra points.
Do not try to write off your everyday meals as business expenses
The CRA allows you to deduct meals for LEGITIMATE business reasons. If you were employed, you would not claim everyday meals even if you are on a lunch break eating out so why should you make your business pay for this? Legitimate business reasons include two categories – Travel Meals, and Meals and Entertainment for wooing clients. While you can’t usually claim any of your living costs as business expenses, expenses you incurred while you were away from home if your travel was related to earning business income are legitimate income tax deductions. The general rule for tax deductions related to meals and/or entertainment is that you may deduct up to 50 percent of the cost of meals and/or entertainment, or “an amount that is reasonable in the circumstances, whichever is less” (Business and Professional Income Guide, CRA). Incidentals such as coffee and doughnuts are not included!
Do not pay for refreshments for your workers or subcontractors
These expenses are not deductible as a business expense. There’s nothing wrong in buying an employee or subcontractor a coffee to show appreciation! However, it needs to come out of your pocket.
Putting these financial “rules” in place will allow you to have more money available to your coaching business when you need it. So you might pay a little more tax at the end of the year because you didn’t write off as many “expenses.” But that also means you will have more money in the bank!
I would recommend adding “I will only pay and write off legitimate business expenses” to your business guiding principles. If you don’t have guiding principles, then it’s about time we talked!
Diligent Assistant is a Virtual Assistant and Business Management Agency (OBM for coaches) dedicated to helping coaches smarten up their business so they can focus on doing what they do best – coaching, facilitating and leading.