I bet you never thought your blogging activities would result in so many business decisions being made in such a short amount of time. Well I have news for you, between investing in your blog with a few of your own dollars, opening a business bank account to centralize your income and expenditures, and hiring staff to keep up with the demand for more information from your audience, you’ve already managed to create a diary documenting all the success and/or failures you’ve experienced throughout the year.
Whether you’ve started making money or are on the path towards financial freedom, it’s important to review your financial transactions at least twice a year to ensure that you are making the well informed financial decisions necessary for taking your business to the next level.
So today, I’m going to share with you the 6 most important financial documents you need to collect and review to ensure the growth of your blogging business.
Personal Bank & Personal Credit Card Statements
Yes. That’s right. This is a two-fer. Lol!
The fact is, whether you use a personal debit card, check, or credit card to purchase digital products and services to start and run your blog, the transactions generated by either of these statements are treated the same in the accounting world.
What does that mean?
It means, when you use your personal funds to bankroll your blogs startup cost, you are essentially loaning money to your business prior to getting it off the ground (financially speaking).
The 4 most common startup cost for your blog are your domain name, web hosting, landing page service, and email service provider. Because we tend to use our personal funds to pay for these startup cost, when we finally do transform our blog into a business we tend to forget about all of the personal funds we invested to get the business off the ground. So I found that the easiest way to track down these forgotten transactions is to:
- Gather your personal bank and credit card statements
- Search for all of the purchases made for your blogging business
- Use those transactions as a guide to collect the receipts for each business expense.
Business Bank Statement
When you finally make the leap from blogger to business owner, you’ll find that one of the best business moves you will have ever made will be opening a business bank account. This is because the bank account simplifies your search for all your sources of income and tax deductible business expenses by housing them all in one place. In addition to simplifying your search, this document is considered the most important financial document because at some point during the duration of your company’s existence you’ll have at least 1 transaction from one of the other 5 financial documents show up on this statement.
The easiest way to collect this document is to login to your financial institution’s online banking portal to download the PDF versions of your statements. Once you do this, you can file it away in your professional bookkeeping filing system (click here to learn the filing system setup).
Cash Receipts
Cash receipts?! Um, Kianja didn’t you get the memo? I run an online business. Why would I concern myself with cash transactions?
First….
Yes, I got the memo. Lol!
Second…
The truth is although you run an online business, there are still times where you’ll find yourself using cash to run your business. For example: you may find yourself tipping the curbside baggage check-in attendant at the airport during your trip to your first bloggers conference.
Seriously Kianja, the baggage check-in attendant? Yup! I’m serious. To be honest, it’s not something entrepreneurs (especially those in the online business space) really think about. However, these type of transactions (cash receipts) tend to become the number one most forgotten tax deductible business expenses by entrepreneurs (online & offline).
So to make sure you give yourself the opportunity to include such expenditure, you’ll want to gather these receipts and create an expense report documenting the details of your cash transaction (date of purchase, vendor paid, what was purchased, and the amount paid). I find the easiest way to track down these cash receipts is to search my business bank account for cash withdrawn during the same time frame and match the cash receipts to these withdrawals.
Payroll Reports
As your team begins to grow, you’ll eventually work with a payroll service provider who will give you payroll reports for each pay period. These reports are not just important because they tell you how much you’ll need to pay your staff and taxes. These reports are important to collect because you want to make sure that the correct amount has been withdrawn from your bank account and paid to the appropriate government agency.
I’ve seen on more than one occasion where penalties and interest have been assessed on top of tax payments because clients were accidentally short on paying their previous tax bill.
Now I know what you’re thinking, I hired the payroll company to take care of all of this for me. So why do I need to review this document?
Here’s the deal. No company or person is perfect. At some point in time, an error can and will occur. You just want to make sure you catch these errors early, so you can correct them and avoid paying unnecessary payroll penalties and interest.
When it comes to collecting these reports the great thing about using a payroll service is that many if not all of the companies either email you a report or provide an online portal where you can download these reports yourself. So make sure you use one of these options to download yours.
Business Credit Card Statements
Okay, so a business credit card is not a common financial vehicle that every entrepreneur has the privilege of acquiring. But for those who do have that privilege the Business Credit Card is the second most important financial document you’ll collect. This is because business owners use their business credit card just like their bank debit card.
As a matter of fact, a common misconception about the business credit card is that it’s the same as a personal credit card used for business. This is not the case. They are documented differently on your financial reports (specifically your balance sheet). So as a rule of thumb, when you’re gathering this document for your records make sure your business credit card shows an account registered under the business’s name, not just your name (Ex. My Blog, Inc. Kianja Johnson).
Just like your business bank account, the easiest way to collect this document is to login to your credit card companies online portal and download the PDF version for each month’s statement.
These financial documents are your foundation for creating the financial reports you need in order to make informed financial decisions for your business.