As I have often been heard saying to clients and team members, "We only do two things. We add items to the punch list, and we work the punch list." Keeping track of every single thing that needs to be accomplished is an essential and required skill in business.

  

Trello manages my punch lists for everything.

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Oh, the list is endless! The freedom, the flexibility, the ability to control your own destiny, the opportunity to build something that compounds on itself year after year. (Yes, this email is putting aside all of the stress, frustration and downsides of being a business owner!)

Financially focused, though... business owners have a significant advantage over a W2 employee... 

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This is a compilation of the key fundamentals of bookkeeping & financial oversight at every company.

Here are the key things we've learned over the years working with dozens of small businesses:

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Every company needs to track their business income and expenses. There are lots of software products available for this purpose. Unless you have a reason to decide otherwise, when you start out you should use QuickBooks. QuickBooks has a desktop and an internet-based version (“QuickBooks Online”). Either is initially fine. QuickBooks Online can be navigated with minimal initiation and it has integrations to connect with lots of other software. QuickBooks desktop (which can also be hosted in the cloud so that you can access it from anywhere) is the choice of power users who value speed and efficiency when working in the software.

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If you are the 100% owner of a business, and you are the only employee in the business, there is a game-changing, wealth building advantage available to you that very few people have. If this situation applies to you, this may be the one narrative you read this year that has the single most profound impact on wealth building in your lifetime. One-employee business owners can save significantly more for retirement each year, at a lower cost and greater benefit, than nearly any other type of worker in the United States.

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The breakeven point is a critical number to know in managing a business, particularly for any business that is not abundant in profit. A company's breakeven point refers to the exact amount of revenue needed to generate zero net income - no profit and no loss. 

When I was younger, working as an employee for large corporations, I used to think that the optimal amount for each person to put into their 401k is the level that maximizes the employer match.  That is wrong. Oh, if I could only teach my younger self what I know now!

If you are the only owner of a business, or an owner in a closely held business, this may be a way to save an additional tens-of-thousands of dollars for college for your kids compared to the way non-business owners (W2 employees) are able to. However, there are some rules to follow and details to pay attention to.

The overall objective is to pay your child out of the business, as payroll expense to the business which ideally would have a low tax impact to your child, then to put those funds directly to education. The alternative, if you don't do this, is that you would have more income in the business, which then gets taxed at a higher tax rate, plus you need to use your own personal after-tax income to fund the college savings for your child.

The whole point of reviewing the history of where a company is, and has come from, is to get an idea for where the company will be in the future. The past can’t be changed, but the future can.

You’re already ahead of much of the competition if you have a good understanding of the current financial health of your business, including which numbers and KPIs are trending favorably vs unfavorably. The great business managers use this information to build out their crystal balls of where their companies are going to be in the future, using that knowledge to make decisions.

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Cash flow forecasting is about predicting a company’s cash balance in advance, including the low cash point, so that business managers can know as far in advance as possible if or when a cash flow problem might come.

Even profitable businesses with dedicated employees and products or services loved by customers can run out of cash.

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Protecting against the downside is important and too often overlooked. Statistically, recessions hit about every 10 years. Some are worse than others, of course, but they do occur with predictable frequency. Planning your company’s approach if the financial situation deteriorates doesn’t have to be an emotional acknowledgment that a downside is coming. Instead, think of it as good, thorough planning.

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Decisions to be made when presented with tricky situations about whether to make exceptions for a potential customer’s request for unusual payment terms, or on how to handle an ethical issue, or to what type of revenue the business should say “no,” are helped if the leader or leaders of a business have already thought through the company’s principles in advance.

Here are some examples of principles that I have seen guide the decisions of business owners and their businesses with the right path often isn't clear.

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Most organizations don’t need a full time CFO until revenue is between $25 million to $75 million depending on the complexity of the business and the talent level of the Controller. The numbers just aren’t big enough on the financial statements to warrant that kind of salary expense. However, nearly all businesses can benefit from the guidance from a part-time CFO, and there are plenty of them in the market.

There are some minimum-scope tasks and responsibilities a CFO should do every month, except for small organizations where these potentially could be done quarterly. I call this the “regular rhythm” for a part-time CFO.

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Like most people, you’ve spent your career as an employee, receiving a paycheck each period and a W2 to include with your tax return at year end. Now you’re a freelancer. What’s different?

Aside from the need to be responsible for generating your own income, and having some additional requirements to track income to report on your tax return, there are some more practical changes most freelancers can be mindful of to maximize business expenses and reduce taxes. As a freelancer, you are now both an individual and “a business” in the eyes of the IRS. Here are some tips and considerations that apply to most freelancers.

Running a business isn't easy. The statistics prove that. Half of all companies don't survive past five years, and for a lot of the ones that do make survive there is often a huge gap between the founder's dreams in the honeymoon stage compared to the reality of anxiety and underperformance.

Being a successful business owner of a company with a few employees or less doesn't require an MBA, and the principles to follow aren't complex or intricate. The fundamentals for how to run a small company are well established and well known. You still have to follow them, though. Following the fundamental principles will carry almost any one-owner business to a certain milestone of success and sustainability.

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