Managing Your Online Business Finances: Budgeting, Tracking, and Apps

Starting quarterly planning (or any other type) can be challenging initially. Consider using templates from Fellow to guide your first planning session. Another great option is Evernote.

Do you run your online business and want to know your financial future? Well, your financial future is like a download bar – sometimes, it progresses smoothly, and other times, it just freezes. Stay caffeinated and keep hitting refresh!" ☕🔄 A Czech survey about freelancers shows that fluctuations in income and expenses or, rather their unpredictability, are major sources of stress for independent professionals. So, it's essential to take your online business seriously and plan for its financial stability.

Effective money management is extremely important for small online businesses. Think of it as the foundation for success. These businesses operate on the Internet, where it's easy to start, but it takes effort to sustain. Money management goes beyond tracking income and expenses. It involves making smart financial decisions to ensure your businesses can do well and grow in the online world. 

In this article, I'll cover three key topics: budgeting, tracking income and expenses, and mobile apps for money management. Tune in!

Setting the Financial Foundation - The Budgeting Basics

Think of a business budget as a reliable map for making smart financial decisions. It's a tool that provides you insight into where your money is going. With a business budget, you can forecast your income and expenses for the upcoming months and figure out if you'll end up with a profit or incur a loss. Now, let's dive into how to create a business budget.

 Step 1: Know what you make and spend on your business. 

Start by calculating the monthly income generated by your online business. This should include the cash you get from selling products or providing services online. Since most online business owners engage in multiple activities, make sure to account for all of them.

Next, make a list of all the expenses incurred for your business. This may include payments for your website, subscriptions, invoicing tools, internet bills, and other costs like advertising or shipping fees. Remember to add any educational expenses, such as memberships or courses you pay for, and one-time purchases like your computer, phone, headphones, camera, microphone, tablet, or additional screens. 

 Step 2: Set goals for your business and monitor them regularly 

Decide how you want to allocate your business funds. Each year, aim to expand your business by investing in a new website, acquiring new equipment, or other means.

Keep an eye on your progress and be flexible with your plan. Check your money often to ensure things are going as planned. If things aren't going as expected, be prepared to make adjustments as necessary. For example, you can monitor your goals monthly, quarterly, or yearly.

• Monthly planning is the most common among small online businesses, and I've used it for years. However, one month is a short time frame, and sometimes you might feel like starting again from zero every month. In such cases, consider quarterly planning.

• Quarterly Planning offers a strategic approach that balances short-term execution with long-term goals. Every three months (starting from January, April, July, and October), set goals, document strategic plans, and celebrate achievements. To effectively plan for a quarter, start by reflecting on the accomplishments and areas for improvement from the previous quarter. 

Now, let me ask you a question. Do you find it challenging to get things done? Does your to-do list seem endless? Quarterly planning could be the solution you've been looking for.

 Here are some reasons why a quarterly plan can be beneficial:

• You know the next steps. No more uncertainty about what to do next.

• Increased confidence, organization, and reduced stress because you're working towards meaningful goals with sufficient time to accomplish them.

• Sense of accomplishment. You'll feel so good by fulfilling your commitment to work on important goals.

 Whether a quarterly plan is better than a monthly plan depends on the context and individual preferences. Each planning approach has its advantages, which depend on the goals' nature, tasks' complexity, and available resources.

Starting quarterly planning (or any other type) can be challenging initially. Consider using templates from Fellow to guide your first planning session. Another great option is Evernote which helps you take notes and stay organized in the digital world. With its user-friendly interface, you can effortlessly create and organize notes, keeping track of your plans.

 Step 3: Save for emergencies

 It's wise to set aside some money in case something unexpected happens. This can help your business stay strong during tough times. However, because many small online businesses do not have stable income, your emergency fund supports you during low months. The emergency fund should be around 3-6 months of monthly spending.

 Here are a few tips on how an emergency fund should look:

• Sufficient Funds: Save enough to cover your living expenses for 3-6 months. This includes rent, mortgage, bills, food, and other vital costs. It's even better to save a bit more if possible.

• Easy to Get: Your emergency fund should be in an account where you can quickly and easily access the money when needed. 

• Diversify Your Savings: It's smart to distribute your emergency money across different accounts, like savings accounts or safe investments. This way, your money remains secure and might even increase slowly over time. 

Remember, building an emergency fund is a gradual process. It may take time to reach your goal, especially if you have limited resources, but every small contribution counts. Set aside some money every time you receive payment. Stay patient and committed, and you'll gradually create a financial safety net to protect against unexpected expenses.

Tracking income and expenses

Tracking your income and expenses is important for effective financial management.  Whether your goal is to save money, increase profits, or improve your financial situation, keeping a close eye on your finances is key. In a world where money matters can be uncertain, tracking income and expenses isn't just a choice; it is necessary to maintain financial health. Here are three tips to help you stay on top of your finances.

 1. Separate your money

Keep your business money separate from your personal money. By having multiple bank accounts, you can better monitor your spending. Assign a specific purpose to each account. It's a good idea to have at least four different accounts: one for business expenses, one for personal expenses (like rent and food), one for personal indulgences (like vacation, traveling, hobbies), and one for investments. 

Having multiple bank accounts also allows you to take advantage of special deals from different banks. For instance, it may be difficult to obtain a credit card, but with multiple accounts, your chances of getting one are higher. 

 2. Regular Updates

Avoid waiting too long to update your financial records. Delaying the update of your income and expense records can lead to financial confusion. To prevent this, make it a habit to update your records regularly. You can do it daily, weekly, or monthly, depending on your schedule and preferences. Just be consistent. 

• Daily: If you prefer real-time financial tracking, daily updates are the best option. This approach allows you to see exactly where your money goes on a daily basis. You can easily identify unexpected expenses or income and make quick adjustments to your budget. For daily tracking, using a mobile app is recommended, as it enables immediate recording of income and expenses.

• Weekly: Updating your records on a weekly basis is a good compromise between daily and monthly tracking. It gives a broader view of your financial activities while allowing you to catch any potential issues early. This approach keeps you informed without feeling overwhelmed. 

• Monthly: Monthly tracking can be a practical choice, especially if you have a manageable number of invoices each month. It offers a comprehensive overview of your finances and requires less time commitment. However, it is important to maintain discipline to ensure that no important transactions are overlooked. 

 3. Choose your tracking method

Decide how you want to keep track of your finances. While you may already be proficient in financial management, you might still be recording your income and expenses on paper or using Excel. However, there are numerous applications available that can simplify the process of manually recording your finances or provide advanced reports and graphs. 

Applications for Money Management

What should the best apps be able to do? The goal is clear management of the financial budget, both personal and company. Working with them must be simple and intuitive, and the result presented must be clear. Ideally, the app should be free. But that's not all. The best apps allow you to categorize expenses, manage contracts, and retrieve receipts or warranty cards. Here are our top 2 mobile apps to get inspired.

 1. Spendee

Spendee is an application developed by Czech developers. It has over a million downloads on Google Play and a rating of 4.3 stars out of 5 on Google Play. The app is free and available not only in Czech but also in English.

You can easily track your cash flow by linking your bank accounts to your Spendee account. When you connect your bank accounts, all your incoming and outgoing transactions are automatically imported into Spendee, giving you an instant overview of your cash flow month over month. The more accounts you link, the more accurate the financial dashboard will be. It supports banks from all over the world.

Unlike other applications, Spendee allows you to take a photo of the receipt, add information about the location, and all the data will be loaded into the app. You can then sort everything into categories, such as entertainment, travel, and bills. These budgets will alert you if you're reaching the top of your budget or going over, making it easier to manage your money and adjust your spending if necessary.

Spendee has three price tiers with various financial features. The Basic plan is completely free and provides a basic overview of your finances, allowing you to connect your bank account to review and monitor your cash flow. 

2. Wallet

Wallet is a product of a company also based in the Czech Republic. It has a rating of 4.5 points out of 5. The app is free, but some features are only available in the premium paid version, which costs CZK 449 for an annual subscription.

The app has three main sections to help you understand your financial data:

• Accounts: Breakdown of your spending across all accounts, including debit and credit card spending.

• Wallet Now: Shows a simplified version of your accounts, plus a list of all of your bank connections.

• Statistics: Where you'll find all of those colorful charts.

Like Spendee, the application is connected to your bank, synchronizing and sorting bank transactions into categories. It currently supports over 4,000 banks worldwide. However, the free version doesn't include bank connections.

There's also a really fun money mindset game. Once you have five transactions imported, you unlock a game called "Was it Worth It?" It's interesting because I haven't seen any other app discussing how spending affects your emotions.

Your journey to financial security and success begins with self-awareness. Take a moment and consider the following five questions. Your responses hold the key to unlocking a better future for your online business.

1. Do you know how much money your business makes and spends each month?

2. Have you set goals for your business for the short-term (monthly), medium-term (quarterly), and long-term (yearly)? Have you written them down?

3. Are you saving money for unexpected situations, such as emergencies? Do you have a plan to grow your savings?

4. How many bank accounts do you have, and what are they used for?

5. How often and how do you monitor the money flowing in and out of your business?

In conclusion, managing the financial future of your online business is like watching a download bar—it can progress smoothly or freeze unexpectedly. So, as you continue to run your online business, keep an eye on that financial download bar, stay caffeinated, and refresh your strategy as needed.

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