Module 06 of 10
Setting up your finances
The financial foundation is the same for every business — separate accounts, clean bookkeeping, a tax reserve. But physical businesses and trades businesses have additional financial realities that online businesses don't: cash handling, larger startup costs, equipment and vehicle financing, and pre-opening costs that arrive before a single dollar of revenue does.
The core setup — same for every business
Before your first transaction — before you take your first customer, sign your first contract, or make your first purchase — four things need to be in place.
A dedicated business checking account. Every dollar in and out of the business flows through this account. Nothing personal touches it. You'll need your EIN and LLC formation documents to open it. For physical businesses that handle cash, choose a bank with convenient branch access for deposits.
A business credit or debit card. Used for every business purchase — supplies, fuel, materials, software, advertising. Creates an automatic paper trail and simplifies tax time. For trades businesses, this card will see high volume on materials purchases — consider one with cashback on business spending.
A tax reserve savings account. A separate savings account where you transfer 25–30% of every deposit immediately. Self-employment tax alone is 15.3%. This account is untouchable until tax time. Physical and trades businesses often have higher revenue than solo online businesses — the tax bills are proportionally larger.
A bookkeeping system. A method for recording every transaction — income and expense — with a category and date. Physical businesses with POS systems can auto-export sales data. Trades businesses need job costing built into their bookkeeping from day one.
Most common mistake
Using a personal account for business expenses during the build-out period — "until I get set up properly." Pre-opening expenses (contractor deposits, equipment purchases, permit fees) are real business expenses with real tax implications. They need to be in business accounts from the first dollar spent.
In this Module
Core four setup steps
By business type
Reserve accounts
Setup checklist
Related Modules
Bookkeeping basics
Cash flow
Job costing & estimating
Additional financial setup by business type
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Cash handling procedures
If your business accepts cash, you need a defined process from day one: opening drawer amount, how to count and verify each shift's cash, end-of-day reconciliation, safe drop procedures, and bank deposit schedule. Cash that isn't tracked disappears — not always to theft, often to simple error. A clear procedure eliminates most cash discrepancies before they become a problem.
Sales tax collection from the start
Set up your POS to collect and track sales tax before your first transaction. Sales tax money belongs to the state — it's not your revenue. Keep it in a separate account or at minimum track it separately so you're not spending money that you'll need to remit. Set up your state sales tax account and know your filing schedule (monthly, quarterly, or annual depending on your state and volume).
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Cost of goods tracking from day one
Food businesses live and die by their food cost percentage. Set up your bookkeeping to track cost of goods sold (COGS) separately from operating expenses from the very beginning. Your target food cost percentage (typically 28–35% for restaurants, varies for retail food) should be built into your pricing and monitored weekly — not discovered at year-end.
Separate accounts for liquor sales (if applicable)
If you hold a liquor license, your state may require separate tracking of alcohol sales for reporting purposes. Check your state's alcohol control board requirements before your first sale.
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Mobile payment setup before your first market
Square, Stripe Reader, or PayPal Zettle let you accept cards from a phone or tablet. Set this up and test it at home before market day — don't discover a connectivity problem with a customer waiting. Most markets have spotty cell service; download your payment app's offline mode if available. Have a cash drawer as backup with enough change for a busy day.
Market-by-market revenue tracking
Track revenue and expenses separately by market location. Some markets will be worth your time; others won't. You won't know which without the data. Your POS or a simple spreadsheet should capture: which market, date, weather, revenue, items sold, and cost of booth fee. This tells you where to spend your Saturdays.
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Job costing from your very first job
Job costing means tracking revenue and costs for each individual job — labor hours, materials, subcontractors, equipment time, fuel. Without it, you know your total profit at year-end but not which jobs made money and which didn't. Trades businesses that don't job-cost often discover they've been losing money on their most common job type for years. Set this up in your bookkeeping system before your first invoice.
Materials purchase tracking and markups
Materials purchased for a specific job should be tracked against that job. Your markup on materials (typically 10–20% for most trades) is part of your revenue — it needs to be billed and tracked separately from labor. Use a business card for all materials purchases so there's a clean record, and code each purchase to the relevant job in your bookkeeping.
Deposit and progress billing procedures
Establish your payment terms before your first job: what deposit percentage you require upfront, whether you bill progress payments on larger jobs, and your payment-due timeline. Your contract should state these terms clearly. Most trades businesses require 30–50% upfront on projects — don't start work without a deposit.
Reserve funds — physical businesses need more of them
Recommended reserve accounts for physical and trade businesses
TAX RESERVE
25–30%
Of every net deposit, into a separate savings account
EQUIPMENT RESERVE (TRADES)
$200–500/mo
Set aside monthly for equipment repair and replacement
OPERATING RESERVE
3–6 months
Of monthly fixed costs — rent, payroll, insurance, utilities
SEASONAL BUFFER (SEASONAL BUSINESSES)
2–3 months
Of slow-season operating costs, saved during peak months
WHY PHYSICAL BUSINESSES NEED LARGER RESERVES
Physical businesses have fixed costs — rent, payroll, utilities — that continue whether or not revenue is flowing. A slow month for an online business is uncomfortable. A slow month for a business with $12,000 in fixed monthly costs is a crisis. Building reserves during strong months is not optional for any physical business.
Business checking account open
Business savings account open (tax reserve)
Business debit or credit card in hand
25–30% tax reserve transfer set up
Bookkeeping system chosen and first transaction recorded
Sales tax account set up with your state (retail)
Cash handling procedure documented (cash businesses)
Mobile payment system tested (market vendors)
Job costing categories set up in bookkeeping (trades)
Deposit and payment terms documented (trades)
Financial setup checklist
Real-world examples
Kate — children's clothing boutique
Retail, cash and card
Kate set up her finances two months before opening. She opened a business checking and savings account at a local credit union (branch nearby for daily cash deposits), got a business Visa for inventory purchases, and set up Square for in-store sales. She created a one-page cash handling procedure — opening drawer of $200, count at each shift change, safe drop anything over $500, daily deposit. In her first year she had zero unresolved cash discrepancies.
Simple procedures established before day one — zero cash issues in year one
Jake — landscaping and irrigation
Trades, project-based
Jake started job costing from his first residential job — a $4,200 landscape installation. He tracked labor hours ($38/hr), materials ($820), equipment time ($60), and fuel ($45). Total cost: $1,610. Revenue: $4,200. Gross profit: $2,590 (61.7%). Two years later he ran the same analysis on his lawn maintenance route and discovered his hourly profit was nearly identical — helping him decide to shift his growth strategy toward higher-margin installation work rather than expanding the route.
Job costing from day one revealed which work was most profitable two years later