Over the past few days, I considered making some drastic changes to the way I report my finances at the end of each month. I’ve been trying to decide whether it makes more sense to separate my business accounts from this report and report the numbers separately as I did a few years ago, remove the business accounts altogether, or leave the report the way it is.
I’m not sure how relevant my business bank accounts and receivables are to my personal finances. I transfer as little as possible between the business and personal accounts to keep my income taxes low, so most of the revenue stays “in the business.”
I didn’t change the report for May before putting together this article. These numbers include my business accounts and personal accounts commingled, like usual.
I’ll need to start making some decisions about how to better manage the business cash. I wrote about a friend of mine who was looking for better interest rates for his business’s cash and he decided to take advantage of business CDs offered by a local bank; I prefer to avoid long-term CDs with the rates currently so low. I’m not sure an investment account for my business is the right approach either, so I’ll ask around among colleagues to get some ideas.
I expected to see a seasonal dip in business income in May, like in 2009 and 2010, but that was not the case this year. Keep reading to see the numbers. You can see last month’s numbers have been revised upward; I expect the same to happen this month as more business invoices are calculated.
For those curious — and every month I don’t explain this, someone asks — I create the above report using a combination of Intuit Quicken and a Microsoft Excel template. Quicken provides the capability of tracking my spending and income, and at the end of the month, I export a custom report to a file compatible with Excel. I open the output and use the data as input for the template. I add a column for the latest month, update a few formulas to track the change percentages, and copy in chart into a graphics editor.
Cash in banks
I am trying hard to get all major clients to pay the business via direct deposit. I’ve been moving back and forth between my apartment and my girlfriend’s apartment in New York so much, it’s difficult for me to find time to get to the bank to deposit checks. As I said above, I keep most of the cash in the business and transfer only what I need to personal accounts. This means that whatever I don’t need is just left in cash.
I’m open to suggestions for how small businesses usually manage their assets when they are not distributed to the owners or shareholders. The large company I used to work for had entire departments dedicated to investing company-owned assets and still left a sizable portion of these assets in cash accounts, so my experience there isn’t much of a help.
Investment and retirement
Overall, my investments performed poorly during May, reflecting the overall stall in the market. The only investments that increased this past month were my Individual 401(k) at Vanguard, which increased only because I added to my investment in the Total Stock Market Index, and a small investment account at ShareBuilder that includes an investment in Toyota ADR. TM is up for the month but down from the recent peak earlier this year.
In May, there was a change with one of my major clients. Rather than paying the invoice within 30 days, this client be paying within 60 days. This will affect the accounts receivable balance starting in June. While this is creates an unfortunate delay, it comes with the benefit of eliminating a middle-man arrangement and increasing the value of the contract.
2004 Honda Civic
My car passed 131,000 miles on the odometer this month. I’ve been driving from New Jersey to Queens and back more often, and this past weekend, I drove to upstate New York for a friend’s wedding. It’s time for regularly scheduled maintenance, though, so in a few days I will call the dealership to schedule an oil change and a few other minor adjustments.
At some point over the past few days, most likely while the car was tightly parallel parked on the street in Queens, a red car hit my Civic’s rear bumper and left a large scratch. The last time I was at the dealership, I asked for an estimate to repair the smaller scratches and dents on the vehicle, but the price from their body shop did not make the expense worthwhile. I don’t plan to sell this car, so its appearance doesn’t usually bother me, but perhaps insurance will cover the cost of fixing this larger scratch.
The scratch changes my car’s condition from Excellent to Average, and with that change, I should take a significant hit in my valuation. I haven’t updated the value of the car in Quicken beyond my standard $100 decrease for depreciation.
This includes my business bills that are invoices but unpaid at the end of the month as well as any credit card balances. I pay my credit card balances in full every month to avoid interest fees and late charges. I’m thankful that, unlike ten years ago, I earn enough income to cover the basic living necessities and no longer need to worry about going into debt just to commute to work every day. There was a big decrease in my business expenses in May, which resulted in the drop in accounts payable from last month.
Typically, business slows down in the summer. I have every reason to expect the same. Despite slower progress building the business, I have some new deals in place that will keep income very healthy. As far as expenses go, June will also be slow. I see no major expenses coming up this month. I plan to visit family in California for a few days, but that trip is already paid for. I expect to take a vacation later this summer, so I’ll likely plan for that this month.
What are your plans for the summer?
Updated March 6, 2012 and originally published June 1, 2011.