Cash flow is the one thing that’s going to keep you in business. Yet creating a system for managing cash flow is often overlooked. You may have new client systems, launch systems, and time management systems in place but do you have a system to ensure profitability?
We are nearing the end of the year and paying your remaining 2020 taxes is likely lurking on your radar. If you are feeling nervous about this or if you are reviewing your bank account and wondering where the profit went this year, the time is now to put a profitability plan in place for 2021. Read on and I’ll tell you how and give you a tool to get you started.
Here is how this works:
In many businesses cash gets deposited into one bank account. Expenses also get paid from this account. More importantly, you may look at your bank account balance and have an emotional reaction (Yay! Or YIKES!) which could then affect decisions you are making in your business.
To ensure the fiscal health of your business, implementing a cash flow management system, like Profit Fist will create a strong financial foundation for your business. Here’s how it works.
- Cash comes into your business and is deposited into your “Income” account.
- Every two weeks (or on a regular basis that works for your business) cash is then allocated into these 4 primary accounts: Profit, Owner Pay, Tax, and Operating Expenses.
- The amount of cash that is allocated into each of these accounts is determined by the amount of revenue your business generates.
That’s it – pretty simple!
Why do you need this?
The process is simple but the results will have an exponential effect on your business.
- You will have cash set aside to pay your taxes – no more stressing around tax time trying to create the cash to pay the government.
- You will have the confidence to pay yourself appropriately – no more guessing what you can take from your business to support your lifestyle.
- You will have a better understanding of what cash you have on hand to pay expenses – no more overspending or no more guessing what you can invest in that new project, person, or idea.
- And, best of all you will actually realize profit from your business – actual cash in hand to reward yourself for the work you are doing!
The Instant Assessment is a tool that will give you a quick picture of the financial health of your business.
First, the tool will guide you through determining your Target Allocation Percentages. These are the allocation percentages for the 4 primary accounts that you eventually want to reach.
Depending on how you have been managing the cash in your business, you may not be at these Target Allocation Percentages yet. That’s OK. Next, the tool will help you see where you are at currently and the changes you need to make in order to reach your Target Allocation Percentages.
Are you ready to get started? Click here to download a copy of the Instant Assessment.
I’ve set aside 5 Strategy Sessions in December and January for entrepreneurs interested in implementing Profit First. I can walk through completing the Instant Assessment, we can review your results together, and I can give you next steps for implementing Profit First. If you would like to schedule one of these sessions, send me an email (Sarah@ElevationOBM.com) and we can schedule a time to meet.
If you don’t already have a cash flow management system in place, let me help you get a strong start to 2021. As a Certified Profit First Professional I can guide you in getting this essential system implemented in your business – whether you decide to DIY or if you need some additional support.