Small Business Finance 101: Minding Your Own Business

Small Business Finance 101: Minding Your Own Business

Published On: October 17, 2022

We’re taking bets here at TEG that this will be the least-read post of all. After all, you didn’t decide to become a fashion designer so that you could have long and riveting conversations about finance and bookkeeping. Indeed it’s not as fun as learning about new advances in sustainable fabrics, or analyzing the latest runways shows. But please, stick with us here because this topic is important to the wellbeing of your business and your brand.

Even though you’ve most likely hired a professional accountant or bookkeeper, or will be doing so very soon, it’s vital that you personally understand the basic bookkeeping needs of your small business. We’re going to assume that you thoroughly vetted your business accountant and deemed them to be trustworthy. Which is great. That said, as the owner of the business, you must have your eye on the finances of your company at all times as well, even if you do have a trusted financial partner.

Know Your Business Accounts

Relax, there’s not going to be a test here, but there are five basic business accounts (and terms) that every business owner needs to know:

  • Assets: These are anything of value that your business owns. Assets can include everything from computers to sewing machines, furniture to pens. Even vehicles can fall into this category. If your business bought it and owns it, it’s an asset.
  • Liabilities: Liabilities are anything that your business owes. Examples include bank loans, loans from family or friends, or outstanding debts to vendors. Pretty much anything you have to pay or pay back.
  • Equity: The resulting difference between your total liabilities and assets is the equity, which is the current financial interest in your business. Assets minus Liabilities = Equity. Super simple.
  • Revenue (aka Income): Granted, for a clothing brand, this category is a bit hard to track. If you’re wholesaling your collection, you should know the amount of your upcoming orders; those are revenue. As far as DTC (Direct-To-Consumer sales) income goes, you’ll be able to get a handle on the ebb-and-flow of that income as time goes on!
  • Expenses: Expenses, on the other hand, are the costs incurred to generate income. This could include textiles, trims and finishes, labor, labels and packaging, shipping and logistics, insurance and more.

Where Did All the Money Go?

Never underestimate the need to track and record EVERY financial transaction. By learning the accounts above, you’ll know how to categorize each transaction.

If you buy a zipper, record it as an expense. If you buy lunch for your staff, record it as an expense. If you make a sale, record it as revenue. If a vendor gives you money back due to some shortage on their part, that’s revenue too (which should have been recorded earlier as an expense when you first paid that vendor). There are little transactions that occur in the course of a busy day that can easily sneak by you.

One tried-and-true trick is to use the same credit card for EVERY business transaction. Not only can it help you keep meticulous records, but many cards offer cash-back or airline mileage programs. So, take advantage of them!

There are also apps that are designed specifically to help you track the comings and goings of your cash. To determine which financial tracker apps are the best overall, Select reviewed and compared over a dozen apps, looking at their pricing and features. They ended up with this list (although you might want to consider others as well):

This next statement will come as no surprise: your business needs cash to keep it operating. Understanding the cash flow in your business is not always an easy task; especially, as we mentioned earlier, if your brand has a DTC sales model. But through diligent bookkeeping, you can analyze and manage your cash flow.

Understanding Financial Reporting

Doing business generates a lot of paperwork (but let’s keep it digital, shall we?). From income tax returns and profit-and-loss statements, to checking account statements and credit card bills, sometimes it can feel like you’re drowning in a sea of numbers. There’s a natural tendency, unless you’re strangely fascinated by accounting, to put it all aside in the “I’ll Get to this Later” pile.

But there is one report that should always get your attention. That is your Cash Flow Statement. This statement helps you assess the all-important question of whether your business is generating cash or not. Whether you’re creating the report yourself, or through your bookkeeper, it’s recommended that a small business generate this information monthly.

If numbers aren’t your forte, then ask your bookkeeper or other trusted advisor for help in reading and analyzing your business reports. Ask all the questions you need to help you understand exactly what the reports are reporting. When it comes to the financial health of your business, there are no stupid questions!

Head to Your Bank

Having a bank account that is completely separate from your personal one is key. Per Kabbage from American Express: “The good news is that you don’t need to have any revenue, and you only need a few documents to open a business checking account. The specific documents you need differ depending on whether you are a sole proprietor, a partnership, an LLC or a corporation.” Your bank or financial advisor should be able to let you know the proper documentation your bank will need for your particular situation.

A business account goes a long way in helping you track your business cash flow. AND, it can legitimately prove that your business is not a hobby.

As a small business, you don’t need all the bells and whistles banks typically offer to larger business bank accounts. But here are a few things you do need:

  • Peace of Mind: Choose an FDIC-insured company
  • Ease-of-Use: Access to ATMs, online banking, mobile banking. All these (and more) will make your life easier
  • Good Terms: Banking fees can be significant, and sometimes hidden (such as ATM service fees). Watch out for fees and make sure you know what you’re paying for.

Being in business does come with financial risks. Be it an unhappy customer, or a disgruntled employee, the chance of a legal problem occuring is real. A separate business account can help minimize your personal risk in case, heaven forbid, a lawsuit is filed against your company.

Pay Up!

Be it big or small, every business needs to establish a payroll system. Firstly, determine the schedule by which you’ll be paying yourself (if you’re a corporation) and your employees. This could be weekly, bi-weekly, monthly or bi-monthly. Choose the schedule that works for your business and let your employees know your payroll process.

Secondly, structure is essential in payroll to avoid any legal liabilities involving the employee’s pay. Even small businesses can face payroll audits from government agencies. Therefore, if you have employees and don’t have a payroll structure in place, we suggest you set one up.

There are many internet-based payroll systems available that will handle all the payroll tasks in a structured and timely manner. Your bookkeeper or accountant will happily recommend the one that makes sense for your business.

So, there you have it. If you stuck with us to the end, give yourself a pat on the back. As we said earlier, financial tasks are usually not at the top of any creative person’s to-do list. Running a solvent and successful business is challenging, no doubt. But if you’re on top of your business’ finances you’ll be perfectly positioned to make your business grow!

As always, we’re always available to discuss your business and its unique challenges. Feel free to reach out to us at or call us at 800-916-0910.


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