fbpx
How to Manage Your Personal Finances Better (with Profit First)

How to Manage Your Personal Finances Better (with Profit First)

by | Jun 25, 2023 | Profit First

Did you know that the famous Profit First cash flow system can be implemented in your personal finances too? The premise of the system is exactly the same, and will help you to save more while spending less in your personal life!
When you implement Profit First, you open 5 (or more, depending on your needs) separate accounts, and transfer pre-determined percentages from your revenue into each account on a regular basis (learn more specifics here).
For your personal finances, you’ll do the same! Here’s how it works:
Setting Up Your Accounts:
1. INCOME: this account is for deposits only
2. VAULT: a savings accounts to cover the unexpected/emergencies.
3. RECURRING PAYMENTS: for the recurring, fixed, varying, and short-term bills.
4. DAY TO DAY: for groceries, school supplies, etc.
5. DEBT DESTROYER: all money remaining after transferring your predetermined amounts into each of the other accounts goes into this account. Goodbye debt!
Then, determine your allocation percentages, and schedule, and get started!
We are Profit First Professionals, trained and certified to help you open these accounts, calculate your percentages, and implement this system in your life! We will help you to save more, spend less, and achieve more financial security in your personal life! 

Schedule Your Free Profit Call Now

4 Tips To Pay Off Debt Faster

4 Tips To Pay Off Debt Faster

by | May 31, 2023 | Profit First

Do you want to know how to pay off debt faster? Are you in personal or business debt and want to know the best ways to destroy that debt? You’ve come to the right place. Try out these 4 Tips for Paying Off Debt Faster.

These are proven strategies that we have implemented with clients and gotten real results.

Case Study: One of our clients had 3 loans she’d been trying to pay off for years, and with these strategies, she paid them all off within 1 year! Watch her testimonial about her experience here.

 

1. AVOID GETTING INTO DEBT

The best way to pay off debt is to never get into it in the first place! Going into debt should be a last resort in both your business and your personal life, and should only be done after much consideration and research. As Mike Michalowicz (author of Profit First) has said, “if you can’t pay your bills, you can’t afford your bills!” Don’t take out loans just because you can. It’s time to tap into the old entrepreneurial mindset and find innovative ways to do business!

 

2. USE THE BOXING METHOD 

 

Pay the minimum balances due out of your operating account every month, treating them like regular bills. If you have extra money in your operating account each month, use it to pay off more! Each quarter, if you receive a Profit payout (see #5), take 95% of that payout and slam it into your debts! It’s called the boxing method because you give small punches to the loans on a regular basis (minimum payments), and then hit the debt with a massive uppercut (quarterly payments). Continue with this routine until all your debt is destroyed.

 

3. LEVERAGING YOUR HUMAN BEHAVIOR: PAYING OFF YOUR SMALLEST DEBTS FIRST
 While logic dictates you should pay your highest interest rate debt first, we as Profit First Professionals teach you to leverage your human behavior-we celebrate “early successes”. When we see early progress in our management of money, we become more committed to the processes that got us those successes, even if the progress is small. In regards to debt, that means paying off your smallest debt first, while continuing to pay the minimum balance due on all the others.
Once the smallest debt is paid off, you should target the next smallest and add the amount you were paying to the first debt onto the second. This creates a snowball effect that will wipe out your debts more effectively and make you feel better about it in the process.
This is not a new concept-Dave Ramsey and Mike Michalowicz have both supported this strategy, and thousands of business owners as well as millions of people have used it effectively.

 

4. MAXIMIZING YOUR CASH FLOW SYSTEM 
Knowing where your money is going is a vital first step for any success in a business. If you know where you are spending your money, you can identify where you can make cuts. We teach the Profit First system, in which you allocate your incoming revenue into separate accounts (things like Profit, Tax, Owner’s Comp, etc.) and the remainder leftover is what you can spend on operating expenses. This way you don’t have all your money in one pot, waiting to all be spent.
It also forces you to cut down on unnecessary expenses, and still save money for profit (which will come in handy every quarter for your uppercut payment on your debt from #2). Once you’ve cut down on expenses, you can free up more money to pay off your debts faster (paying more in minimum payments from #2).
Implementing an effective cash flow system like Profit First that plans for things like Profit and Debt will change your business and reduce the stress of owning and operating your company.
We are certified Profit First Professionals, masters at helping you implement such a system. Contact us to get started on increasing profits and destroying your debt!
 Download PDF Worksheet here.
Schedule Your Free Profit Call Now
Subscribe to get bi-weekly business tips
Profit First Basics: What is Profit First?

Profit First Basics: What is Profit First?

by | Apr 26, 2023 | Profit First

You started your business expecting to take a profit after all your hard work. If you’re in a position now when you are still struggling to see sustained profit in your business, then this system is for you. The Profit First cash flow system organizes and manages your finances in such a way that will increase profits, cut expenses, and reduce the stress of operating a business!

Profit First Basics: What exactly is Profit First? 

Profit First is a cash flow management system developed for small business owners by small business owners. It was founded by Mike Michalowicz, and asserts that you, as the owner, should be rewarded for your hard work and take your profit first! It takes many of the strategies that Dave Ramsey suggests for personal finances, and applies them to business finances.

Profit First is a system that splits your revenue into separate business accounts (Profit, Tax, Owner’s Comp, and Operating Expenses). You regularly allocate a certain percentage of your revenue into each of these accounts, starting with Profit, and watch as the balances grow.

After implementing the system, you will immediately see a growth in Profits, be better prepared for your tax liabilities, and you will learn to cut expenses across your business. See how this business owner achieved increased profits, and was able to save 3x the amount she owed for taxes using Profit First.

So how does it work? The psychology of Profit First 

The Profit First formula: 

The GAAP (Generally Accepted Accounting Principles) formula for determining a business’s profit is Sales – Expenses = Profit. It is simple, logical and clear. Unfortunately, it’s a lie. The formula, while logically accurate, does not account for human behavior. In the GAAP formula profit is a left over, a final consideration, something that is hopefully a nice surprise at the end of the year. Alas, the profit is rarely there and the business continues on its check-to-check survival. With Profit First, the GAAP formula of…

Sales – Expenses = Profit

changes to….

Sales – Profit = Expenses

With Profit First you to flip the formula to Sales – Profit = Expenses. Logically the math is the same, but from the stand point of the entrepreneur’s behavior it is radically different. With Profit First, you take a predetermined percentage of profit from every sale first, and only the remainder is available for expenses.

Parkinson’s Law: 

Author and historian C. Northcote Parkinson theorized that our demand for a resource increases to meet the supply of it. That is why when we are given two weeks to do a project it takes two weeks, and when we are given eight weeks to do the same project it takes eight weeks. That is also why when given $1,000 to complete our work we get it done with $1,000 and when given $10,000 to complete the same work, it takes $10,000.

Profit First makes Parkinson’s Law an asset. By taking profit first, the money available for expenses lessens, and we are forced to find ways to get the same things done for less money.

Bank Balance Accounting: 

Most entrepreneurs don’t have the time or gumption to read the different accounting statements necessary to manage the financial aspect of their business. Theoretically you should review and correlate your Income Statement, Balance Sheet and Cash Flow Statement monthly (or more frequently), but few entrepreneurs do. Most resort to “bank balance accounting,” where we check our bank balance every day and make financial decisions based upon what we see. Per Parkinson’s Law, we consume what we see in our bank account. If all your money is in one pot, that encourages us to spend it all, leaving nothing for Profit, much less other things like tax or debt.

Profit First encourages the entrepreneur to continue “bank balance accounting” by first allocating money to profit (and other accounts) so that the entrepreneur sees the actual portion of deposits that are available for expenses and they automatically adjust their spending accordingly. It creates multiple pots so that you can spend everything in your operating expenses account without having to worry about taking a profit, because you’ve already taken it! 

Leveraging Your Habits:

Many entrepreneurs try to force themselves to become better at accounting and to become more disciplined in their fiscal management by pure willpower. But just like a muscle, willpower can be drained. And in a moment of financial stress or bigger than expected expenses the entrepreneur will break their own fiscal rules and spend the money they have.

The Profit First principle does not try to change your habits (that is nearly impossible to do), Profit First works with your existing habits. By first allocating money to different accounts, and then removing the temptation to “borrow” from yourself, your business will become fiscally strong and you will benefit from regular profit distributions.

Watch this 2-minute video to learn the basics of how the system is implemented, then read on to learn the specifics of Profit First implementation!

 

 

How do you implement the system?

Profit First is best implemented in your business using a certified Profit First Professional. We have achieved Mastery level certification in teaching Profit First implementation to small business owners.

Here are the basics of how it’s done:

1. Set up the 5 key bank accounts (Income, Profit, Tax, Owner’s Pay, and Operating Expenses).

You can rename your current business account as Operating Expenses if you wish.

The Profit and Tax accounts should be savings accounts, and you may want to even open these two at a different bank to make it harder to steal from these accounts to pay bills.

2. Determine your TAP (Target Allocation Percentages

You will do an Instant Assessment for your business to determine what percentage of your income should be going into each account (We can help you do your instant assessment). These are called your allocation percentages.

3. Perform your allocations

All deposits/receipts should be going into your income account. On a regular schedule (we suggest the 10th and 25th of each month), calculate your percentages and transfer the amount into each of the other 4 accounts. The amount will change every time because your revenue will vary (we have a tool that automatically calculates the amount for each allocation).

4. Pay Your Bills with what remains in Operating Expenses account

What is left in your operating expenses after each allocation is what you have to pay all your operating costs until the next allocation. This allows you to set aside money for things like Profit first, and reduce your spending on unnecessary expenses. If you don’t have enough to buy for something, this forces you to be creative and find other ways to pay your bills or cut them down.

5. Take a quarterly profit bonus

Each quarter, you will take 50% of your profit account and pay yourself as a Profit Distribution! This is a bonus to you as the hardest working employee in your business and a reward.

Learn more about Profit First here, and schedule a free profit call with us to learn how it can be implemented in your business!

Get help from a Certified Profit First Professional

It is highly recommended to use a Profit First Professional to help you implement Profit First in your business. We are expertly trained and certified to correctly determine your allocation percentages, and we can help you understand your financial reports, activity, and cash flow in a way that regular bookkeepers or CPAs cannot. Our goal and focus is YOUR business’s profitability, and we are committed to helping you achieve permanent profits in your business.

We at Better Biz Info offer a free Profit call to discuss your needs and talk about how Profit First can be implemented in your business. Schedule your Free Profit call today!

Schedule Your Free Profit Call
Get First 2 Chapters of Profit First for FREE!
6 Strategies to Cut Expenses In Your Business

6 Strategies to Cut Expenses In Your Business

by | Feb 15, 2023 | Profit First

Do you want to learn how to reduce expenses in your business? Feel like you never have any money leftover at the end of the month? Check out these 6 tips for cutting business expenses! These are proven strategies that will cut your expenses, and help you to create a more profitable business. 

 

 
1. AVOID DEBT
 
Going into debt, especially credit card debt, should be avoided and treated as a last resort. It may be appealing to take out a loan or buy things with credit when you need some extra cash, but it will ultimately come back to haunt you. It is far better to try some of these other tips before you even think about going into debt.

 

 

2. REVIEW DUES AND SUBSCRIPTIONS 
 
Ever gotten a free trial for something and then forgot to cancel it? I remember trying out FUBO TV for NFL season and paying $65—and not watching a single game that month! Go through the subscriptions you have and evaluate which ones you actually need to operate your business on. Chances are you’ll see many you don’t need or didn’t even know you had. Cancel them!
The first step for doing this is creating finances organized enough that you can actually find all these subscriptions. Many fly under the radar because you are not categorizing your expenses. We can help you get your finances in order, and evaluate and cut down on your subscriptions as well as other expenses. 
 
 
3. REISSUE CARDS
 
One valuable strategy is to call your credit card companies and bank and reissue cards with new numbers. Since your other cards will be deactivated, your billing information for all vendors will need to be updated. This may seem inconvenient at first, but it will enable you to look at each vendor you have and really evaluate which are low or non-benefit. Our next tip will help you to deal with the vendors you still have to keep after doing this.
 
4. NEGOTIATE
 
Many are afraid to negotiate services and pricing with vendors, and thus miss out on opportunities to cut down expenses. When you go to update your billing information with your vendors, talk with them to see if there are any adjustments to your service to make it more affordable for you. Renegotiate pricing, timing of payment, or what plan you are on. Many vendors are eager to keep you as a customer and will work with you!

 

 

5. POSTPONE PURCHASES
 
Ask yourself, is this something my business actually needs right now? Tap into the innovative entrepreneur you were when you first started your business find unique, inexpensive ways to do things. Figure out what you actually need to operate your business and do without the rest until you actually need it. This is not to say that you shouldn’t prepare for future expenses—that is essential. But buying things just because they would be nice to have is not a good business practice.
 
 
6. REINVENT/REPURPOSE PRODUCTS & SERVICES
 
We should always be evaluating the effectiveness and productivity of our services, but often don’t do so until we are in a crisis. This is your opportunity to take a look at your products and services and evaluate which are not bringing you enough value to be worth continuing. Or, if they are low value but still something you want to do, you can think of ways to repurpose or reinvent so it brings you more value.
 
 
We are Certified Profit First Professionals, masters at helping you implement a cash flow system that cuts down expenses while maximizing profits! We can help you get started on cutting down expenses, and start growing your profits today. 
Schedule Your Free Profit Call Now
 Download PDF worksheet here. 
Subscribe to get our "5 Tips for Increasing Profits" Worksheet!

Is a Tax Account for the Owner’s Benefit?

Is a Tax Account for the Owner’s Benefit?

by | Jan 24, 2023 | Profit First, Better Biz Info, Taxes

Did you know that having separate accounts for Taxes, Owner’s Compensation, and Profit can all work for the benefit of YOU-the small business owner?

In the Profit First cash flow system, you open 5 separate business accounts, these three among them. Then, on a regular schedule (bi-weekly, monthly, etc.), you allocate a certain percentage of your income into each of these accounts. As the balance in these accounts build up, you begin reaping the benefits of being more prepared with an automated cash flow system. And the Owner’s Compensation, Tax, and Profit accounts directly benefit you as the business owner. Here’s how!

Owner’s Compensation Account: this account provides for the owner’s lifestyle and livelihood. It includes take-home pay and any benefits the owner enjoys like health insurance, cell phone, vehicle, etc., even if those benefits are considered business expenses on the tax return.

Profit Account: Profit is the business owner’s reward for running a profitable company. The quarterly bonus that comes from the Profit Account directly to the owner shouldn’t be thought of as just a way to continue to support their lifestyle, but as a bonus for working hard and taking their profit first!

Tax Account: Paying taxes keeps the business owner out of jail! It covers the business owner’s payroll withholding tax and any taxes the owner owes as a result of running a profitable business.

These accounts have different functions and should be kept separate from each other, but they all have the same purpose-serving you as the business owner. Having them reduces the stress of owning and operating your business.

Learn More About Profit First Accounts

As Profit First Professionals, we can help you set up these accounts in your business and learn how to allocate money into them and how much to transfer. Half a million business owners have achieved increased profits, less expenses, and less stress surrounding finances after implementing Profit First in their business. Check out how this business owner was able to pay for taxes and pay off her debts, while still taking a profit using Profit First. 

Schedule Your Free Profit Call Now

How the Profit First system Improved This Business Owner’s Cash Flow

How the Profit First system Improved This Business Owner’s Cash Flow

by | Nov 25, 2022 | Profit First

 

Mandy Shanks from Shanks Heating and Cooling talks about how working with Better Biz Info to implement Profit First has changed her business for the better. After 20 years in business, she finally has financial freedom and stability!

Profit First is the method we use to help small business owners implement a cash flow system that increases their profits, reduces expenses, prepares for future goal achievement, and automates their finances. Contact us to find out more! 

See the video on our YouTube channel here!