29 Apr She lost how much each month?!
Hi, it’s your Money Mavens – and we’d love for you to meet Katie.
She’s now $2,000/month wealthier thanks to one key step…
Katie organized her bookkeeping and audited her expenses.
She discovered she was paying gobs for unneeded expenses, including a Match.com subscription she wasn’t using anymore.
She’s been with her boyfriend for three years. Happily not single – but still paying for the subscription because she didn’t realize it!
We wish we could tell you Katie’s story is unique, but for a lot of business owners, it’s easy to stack up needless expenses.
Another one of our wealth coaching clients found and canceled $9,000 of annual expenses and subscriptions she wasn’t using or were no longer worthwhile because they weren’t increasing her profitability.
That’s tantamount to writing yourself a $9,000 bonus check at the end of this year.
How can you protect against that?
By keeping your business finances – your ‘books’ – organized and updated – and reviewing your expenses at least once a year.
Accurate bookkeeping is a great tool for informing your business growth. Without that insight, it’s easy to fall into several traps:
- Forgetting to cancel subscriptions you aren’t using…
- Making financial decisions in your business based on emotion instead of fact…
- Running out of money each month and not being able to pay yourself…
It’s so tempting to avoid thinking about your finances – but it will cost you!
The good news is there are five key ways you can better organize your business finances to empower your financial future:
1. Pay your business expenses from your business accounts and your personal expenses from your personal accounts.
We highly recommend keeping your business and personal finances separate. This creates a clear line of separation for your tax preparer, bookkeeper, and any potential auditors.
The Profit First system is one of the best ways to organize your business finances.
The only money flowing from business to personal accounts is the money you’re paying yourself from your business.
(That’s coming from the Owner’s Pay account of Profit First)
And yes, you need to be paying yourself something, even if it’s not a full income to start.
If you are paying for business expenses with a personal account, transition that payment type to a business account at the first opportunity.
2. Hire an experienced bookkeeper, preferably someone who works exclusively with business owners.
At some point in a growing business, there’s a need to create a dedicated role for the day-to-day finances.
Hiring an experienced bookkeeper can be a great investment to keep your financial insight up to date, your business’ momentum moving forward, and to save you time and potential errors.
If you do want to hire a bookkeeper, start by looking for a bookkeeper who specializes in serving business owners like yourself.
A specialized bookkeeper can give you an entrepreneur-specific perspective layed over the best practices of bookkeeping.
3. Consider hiring a virtual or part-time CFO (Chief Financial Officer).
Depending on the size of your company and your top-line numbers, your company may also need to hire a part-time CFO, to help you interpret the reports from your bookkeeper and make recommendations based upon cash flows of the business.
This decision can infuse greater accountability and professionalism into the financial aspects of your business.
4. Work with your bookkeeper or CFO to determine the profitability of your business efforts.
How effective is the ROI of your marketing efforts? Your ad spend? Your sales staff? These are calculations a CFO can run for your business so that you have the information to make decisions backed by the data in your books.
Like Katie, you may benefit from an internal audit. Review every expense over the past 3-6 months, if not longer (a full 12 months will show you expenses you pay annually), and see where there may be opportunities to reduce expenses.
If you want to get a better understanding of how to tame your expenses and optimize your profits, Hilary covered the Magic Profit Pyramid in a recent episode of Profit Boss Radio.
Better bookkeeping is the key to better profit potential.
You may be amazed at how much you can find leaking from your business profits – and how easy it is to bring that money back into your life and business.
To your prosperity,
Your HWM Money Mavens