How to design a Money Management Plan That works
A lot of business owners look away when I talk about money management.
That’s probably because things haven’t gone according to plan.
They work hard at their business, but the money’s just not there.
Employees aren’t getting paid. Contractors aren’t getting paid. And of course, they’re not paying themselves what they deserve.
When checks start bouncing, they feel embarrassed to show up at the job site. More often than not, they’re just biding their time, borrowing money from one project to pay for the next.
Now and then they stop chasing the dollar long enough to ask, “how’d I get here?”
What’s the Problem?
Maybe you ask yourself that same question.
Things started out so well, but now you’re questioning if you can even run your business.
The problem isn’t that you’re a bad business owner. The problem is that you don’t have a money management plan.
You haven’t kept track of where your money goes. And as a result, it goes everywhere but in your pocket.
Do I Really Need a Money Management Plan?
It doesn’t matter how bad things are. Whenever I tell someone they need a plan, they immediately push back.
“Do I really need a money management plan?” they ask.
I’ll make this easy.
Yes. You really do.
Benjamin Franklin said that if you fail to plan, you are planning to fail. When it comes to money, Ben knows what he’s talking about — after all, he is on the $100 bill!
As a business owner, when you don’t plan, you’re forced to be reactive. That’s never a good thing.
You’ll have one expense popping up after another and you’ll have to run around putting out fires — or as we put it earlier, chasing the dollar.
Not only does this leave you with a massive headache, it eats up all your profit.
A money management plan makes sure this doesn’t happen. It helps you turn consistent profits.
Want a money management plan that works? You need to make sure it can do these three things:
- Order your books
- Prioritize paying yourself
- Plan for taxes
The Foundations of a Good Money Management Plan
Bring Order to Your Books
Managing the back-end of your business is intimidating. That’s why a lot of business owners put it off. And when they finally get around to doing a little accounting … everything is a mess.
There’s a receipt here, a past due invoice there. Things don’t look that different on the spreadsheet and it’s hard to tell what’s an expense, what’s payroll and what — if anything — is left for you.
Let’s be honest, accounting can be a challenge. The more successful your business is, the more numbers you’ll have to manage.
But there’s a way to make ordering your books easy: QuickBooks.
QuickBooks is popular accounting software. It’s used by small- and medium-sized businesses across the country to organize and keep accounting books, manage and pay bills, send invoices and complete payroll.
These are critical functions for any business. When they’re organized and done well, your company can run like a well-oiled machine.
Nervous about figuring it out on your own?
As a QuickBooks Certified Advisor, I help business owners just like you get the most out of their books. Schedule a call and let’s see how we turn accounting from a nightmare into a major driver of success.
Prioritize Paying Yourself
Now that you have your books straightened out, I’m going to ask you to do something that might sound strange.
Flip the traditional accounting formula on its head.
You see, traditional accounting goes like this:
Income — Expenses = Profit.
While that makes sense, it’s never going to help you get ahead. That’s because, in the traditional accounting formula, profit is just the leftovers.
This leaves you just as reactive as you were before. Expenses will only grow as your income grows, meaning your profit will never increase.
Income — Profit = Expenses.
This might not seem like much of a change, but it will revolutionize your cash flow management.
When you put profit first, it makes you become more intentional about what you spend money on.
It’s the smaller plate theory that helps people lose tons of weight — when you use smaller plates, you eat less food, and when you use smaller expense accounts; you spend less money
In this way, profit becomes a habit and you learn to take home more money.
If you want to integrate profit first into your money management plan, I’m happy to help. As a Profit First Certified Professional, I know how to get you sustainable profit.
Profit First is the most recognized cash management tool in the world for a reason. Make sure it’s in your plan.
Plan for Taxes
QuickBooks and Profit First will set you up well for the third piece of an effective money management plan: tax planning.
Most business owners treat taxes as an afterthought.
But taxes are central to the health of your business.
If you get taxes wrong in business, everything else is wrong.
Tax issues have a tendency to compound. If your plan doesn’t make adequate preparation for taxes, the problems can pile up quickly.
And if you’re not preparing your taxes early, your problems could pile up quickly.
Good tax planning doesn’t just protect you from problems, it also helps you make the most of your business.
There’s a lot more that goes into taxes than just devoting a percentage of your income to the government. I’ve helped businesses across the country stop worrying, decide what entity is right for them and uncover tax breaks that have saved them millions.
For a money management plan that works, you want the same. It isn’t enough to just survive taxes. The right plan (and partner!) will help you see tax strategy as a way to grow your business.
Now Work Your Plan!
An effective money management plan needs to help you:
- Bring order to your books
- Prioritize paying yourself
- Plan for Taxes
If you can successfully implement those three elements, you can move your business from treading water to profitable every month. It takes a bit of work up front, but imagine the relief you’ll feel when you’re able to pay yourself and keep money in the bank.
At Bottom Line, we love helping business owners like you build a smarter, more profitable business. Our Six Figure Profit Blueprint helps you turn this money management plan from powerful ideas to actionable steps and, ultimately, to huge profits.
Schedule a call today and let’s customize a plan to grow your business.