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Who is on Your Business Money Team?

There can be a lot of confusion around who should be on your business money team and their roles (including your role as the business owner). But without a solid team, you may feel confused about your finances–which is never a good feeling.

No matter how long you’ve been in business, it’s time to pull together your team now or revisit the individuals who are supporting you.

Your “Accountant’s” Role

The term “accountant” is broad and is mostly misused by business professionals. For this article, we’ll limit it to the role of tracking your business’s finances and producing accurate financial statements with them. Think P&Ls, balance sheets, reconciliations, and all of that good stuff. 

At a basic level, a bookkeeper will focus more strictly on recording your financial transactions. An “accountant,” however, can give you insight into your financials to help you make strategic decisions. Newer or smaller businesses may suffice with a bookkeeper initially but may have to hire an accountant as the business grows and becomes more complex.

Oftentimes, it’s not the best use of the owner’s time to keep the books. However, you still must understand how to read your financial statements and conduct your financial affairs in such a way that it’s easy for your accountant to track everything (i.e. no commingling of funds between personal and business accounts). Also, if you don’t understand your financial statements and don’t review them regularly, you may put yourself at risk of being stolen from. You want to find an accountant with the heart of a teacher, who will help you understand your financial statements.

Your Tax Pro’s Role

Business owners often think that all accountants prepare taxes. This is not true. Tax and accounting (bookkeeping) are two processes. The accounting needs to be complete before the taxes can be prepared. When seeking out a tax pro, find someone with the heart of a teacher (see a recurring theme there?) who will explain to you how to minimize your taxes and stay in compliance with the IRS and state. If you really want to save on taxes, you’ll meet with your tax pro on a quarterly basis, but definitely at the end of third quarter as you near year-end. Proactive tax planning is the best way to keep taxes low and to ensure there aren’t any surprises come tax time.

You can make your tax pro’s job easier by having accurate and complete P&Ls and balance sheets. Your accountant actually does the heavy lifting in this regard. Be sure to ask your tax pro about any tax savings opportunities or recent changes in tax law that might affect you (a great tax pro will tell you before you ask). Last, make sure you pay your quarterly estimated taxes to the IRS and the state.

NOTE: If your tax pro encourages you to spend off your profit to reduce taxes, seek a different tax pro.

Your Cash Flow Management Coach

We can’t talk about money teams and neglect to mention Profit First Professionals! While accounting tells you where your money came from and when (via financial reports), cash flow management directs where your money goes. We use the Profit First cash flow management system to help business owners become permanently profitable, pay themselves regularly, reserve for taxes, and know exactly how much they need to budget for their business’s expenses. A Profit First Professional can help you design a system that works for your business and your goals.

Contact a Profit First Professional Firm (that’s us!) to do an assessment of your finances and build out a customized cash flow strategy for you. If you contact us, we’ll give you step-by-step instructions.

Last Thoughts

Accounting, taxes, and cash flow management are different disciplines, although closely related. There are some professionals who can do all three, but it’s probably best if you separate some of it out to protect yourself and your money. But all the members of your business money team should be in some type of communication with each other. Just make sure that they are familiar with your business, your industry, or goals, and have the heart of a teacher.

How Profit First Can Help You Talk About Money

As a bookkeeper, I’m always taking the pulse of a business to help assess and improve its financial health—ultimately, so that the humans behind it can have all they want out of life. I talk about money a lot because it’s—no pun intended—the currency I deal in. But it never fails to surprise me how uncomfortable most people are to discuss money, be it their desire for it, their lack of it, or their fear of losing it. Why are we so afraid to talk about it honestly and openly?

Money itself isn’t good or bad. Money is just a thing we use to transfer energy back and forth between people. It’s a medium of exchange to get what we need to live—and then, hopefully, to experience our best lives.

It drives me crazy that money is such a taboo subject, but I get it. I see people ashamed that they’re not providing enough for their family, or that they’re in too much debt, or that they can’t afford what other people can afford. There’s also the hesitation to be proud of financial successes. You’re seen as bragging if you’re doing well.

The truth is, we usually don’t know the whole story behind everyone else’s finances, and we get everything out of whack when we set up comparisons. It’s not apples to apples, because the other guy may be dealing with oranges.

If you can talk about it, you can change it

One of the things I love about Profit First is that in encouraging us to pay ourselves first for our hard work, it essentially encourages us to believe that we deserve that money. It puts money at the forefront of the conversation of why we’re in business in the first place. Sure, you have a great service, product, or skill that you want to offer to the world, but let’s face it, you’re also here to make a profit.

Here’s my two cents on how to talk about money with the people closest to the backend of your business, with the goal of eliminating secrets, banishing anxiety, and making smart decisions that will help you to sustain and grow your business.

Talking about money with your bookkeeper

Your personal financial health and your business financial health are intertwined. Be honest with us about both. We can’t help you with your money if we don’t know what’s going on with your money. Are you in a jam with your finances at home? Are you not making a living wage? Maybe we can make a suggestion on the business end of things that will help to lead you out the hole you might be digging.

Bookkeepers are experts at reviewing your financial data, so we don’t give money advice without having facts to back it up. In other words, we got receipts. Even if your bookkeeper isn’t privy to your personal bank statements, it’ll likely all get fleshed out for her when she reviews your business statements and

And we all have our dirty little money secrets. The things we like to splurge on that no one else thinks worth a dime. Or the occasions we got ripped off and felt we should have known better. As bookkeepers, we’ve seen it all—maybe we’ve even been there ourselves—so nothing is too taboo to share. Tell us so we can help.

Talking about money with your team

What’s appropriate to share with your employees and contractors? This one may surprise you.

I’m a fan of having an open-book policy with your staff and sharing how things are going with your business. I share my P&L figures with my team on a regular basis—they know my allocation percentages. Employees are your boots on the ground. The more they know, the more likely they are to be invested in increasing revenue for your business. Their success is tied to your success, especially when you’re doling out bonuses based on your profits at the end of the year. Isn’t it great when your employees point out how you can eliminate an expense because they’re no longer needing the service you’ve been paying for?

Most business owners don’t want their team to know how much they’re making. But what I’ve seen is that most of the time, your team thinks you’re making more money than you actually are. Sharing your business finances with them can dispel the myth that you’re swimming in cash, and that it would be easy for them to leave and become your competitor—one of the biggest fears that business owners have.

I’ve started to gently encourage my team members to open up a bit about their personal finances, if I have their permission to do so. I can see that it affects their work when they’re struggling at home—we all have money anxiety at some point. If you have staff meetings, you’re probably already providing some kind of business education to them on a regular basis, so consider adding financial literacy webinars and other tools and learning to the mix.

Talking about money with your business partner

Profit First is beautiful for business partnerships because it puts percentages in place from the starting block that both (or all) partners agree to ahead of time. Sure, there will be issues from time to time, but they’re much easier to mitigate when you’re working from an established framework.

It’s also important to know your money personality. Is one of you a spender and the other a hoarder? For example, you could have differing views on what constitutes a necessary operating expense, but at least with Profit First in place, you share a basic understanding of how money will be handled in the business.

Talking about money with your life partner

It’s common for business owners to discuss major decisions about their business (such as big-ticket purchases) with their life partner, even if that partner doesn’t have a legal interest in the business. They’re vested in its success because they’re vested in you.

We advocate for some regular conversation about your business with your life partner. I know a couple that talks about it every Sunday morning, but if that’s too much taboo for you (!), I recommend doing it at least quarterly. Make them privy to the details of your Profit First strategy. I often see conflict where the partner doesn’t understand the difference between your revenue and your profits. You can show them your Profit First allocations to help them understand that you have a plan in place for when and how often money will be flowing out of the business and into your pockets—and how you’re avoiding the need to invest future household income into the business, because you’re saving in advance for things like taxes.

It gets easier

Take it from a bookkeeper—the more you talk about money, the easier it gets. Don’t let a lack of practice hold you back from making progress. Practice!

Customize Your Profit First System with Advanced Accounts

The Profit First system is simple enough that most people can see the immediate rewards of paying yourself first. But no two businesses are alike, and each will have its own complexity. We love that it’s so easy to customize the system to meet the needs of your unique business, by opening additional, “advanced” accounts.

Every business following Profit First sets up the five foundational bank accounts—the buckets, if you will—to distribute income. Then you make your fixed allocation percentages twice a month without deviation. But you’re the owner and you know your business best. After a while, you might notice that something in your system needs tweaking.

Maybe you didn’t foresee having to pay a large invoice that ended up draining your OPEX bucket. Now you’re aware that it’ll be an annual expense for your business—same time, next year—and you want to plan ahead. For example, CrossFit gyms have an annual affiliate fee of $3000, and sometimes owners forget about that until it’s right on top of them.

Take some pressure off yourself. If it will help you to create a new bucket, or account, to meet a specific expense, we encourage it. In fact, there’s a saying that gets kicked around amongst Profit First professionals…

When in doubt, create an account.

By the way, we’re calling these “advanced accounts,” because this is technically an advanced Profit First technique. (That’s right, young Jedi, you’re advancing.) But really, it’s quite simple. These are just extra accounts (or separate accounts, new accounts, sub accounts—whatever you want to call them) beyond the foundational five. Name your accounts in whatever way makes sense to you.

There are lots of reasons why you might want to open up an advanced account and flow some cash into it on a scheduled basis.

A payroll account is an advanced account that we think every business owner should have (unless you’re a solo operation). This ensures that you protect employee and contractor wages so you don’t accidentally run out of money to pay them.

Or, let’s say you know you’ll need to make a big purchase down the road, such as new exercise equipment for your gym. You could open an equipment account and start accumulating those funds now (rather than potentially facing the sudden expense when a machine breaks down).

Or maybe you want to invest in continuing education courses for your staff. If it’s important enough to be a goal, create an account for professional development and start saving for it.

Maybe you want to embark on a marketing push for your business, which will involve hiring multiple vendors. Having a separate marketing account might encourage you to determine a budget in advance and stay true to it, without comingling those expenses with all the other things in OPEX.

Creating more accounts ensures that money is there when you need it to be. It’s really all about preparation and peace of mind.

How to put money in advanced accounts

So you’ve determined you need to create some extra accounts. How are you going to make this work within your Profit First system? Where will the money come from?

Like the examples we’ve been talking about here, most of the advanced accounts that our clients set up are to isolate and cover specific business expenses. In the absence of a new account, you’d be paying these bills out of OPEX. So you’re almost always looking at reallocating money from OPEX when you create an advanced account.

Your allocation target is quite simply how much money you want to invest into the thing you’re creating the account for, and in how much time you want to achieve it. That affiliate fee is $3000 per year? Divide it by 12, and figure out the percentage of your income that equates to. (You want to accumulate $10,000 in an equipment account in 8 months time? Divide $10,000 by 8 and figure out the percentage of your income that equates to.)

You’ll then subtract that percentage from your current OPEX allocation percentage. Your OPEX funds aren’t really being reduced per se, they’re just being redistributed into new accounts so you can very clearly target money toward specific expenses.

Advanced accounts can come and go

You don’t have to use them all the time.

For example, when I’m thinking about growing our team, I start transferring money into my new hire account. I won’t actually bring them on board until I’ve got at least one month of their salary in there (and provided I was able to comfortably accumulate that pay within one month’s time. Check out our important guidance on this in How to Profit First Your Way to Team Growth.) Once I’ve actually hired them, I’ll transfer the funds to the payroll account, and let the new hire account remain dormant for a while—until I’m thinking about hiring again.Occasionally there are times when the creation of an extra account won’t be for an expense, or when it might make more sense to assign dollar amount allocations rather than percentages. Let us help you navigate these trickier cases.

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