A lot of Coaches and Service providers ask me how to pay themselves? Profit Planning is a major part of every business and should be a part of the monthly plan for every business owner in order to get paid!!
As a business owner, past practice has always been that we are the last to get paid and everything you go back into the business during the first few years. Well, that’s not a fact and you should not have to wait to get paid!! We know we must invest in the business until we meet certain goals, but if you fail to plan, then you plan to fail. Knowing this, you should have a good financial system with processes and also a tax strategy, so this post addresses items that are key to profit planning in order to put profit in your pocket right away!
Develop a business budget and cashflow projections.
Developing a business budget and cashflow projections will help you stay on track and know what’s needed to reach your business goals. If you don’t know what’s coming in and going out you can fall short of cash and go out of business real quick.
Here’s how you can get started with knowing what’s coming in and going out and include your salary in the plan:
- List all income expected to come in along with expenses that includes regular expenses and any annual lump payments.
2. Review the plan for income over expenses and how much is available in order to include your pay.
3. You may have to adjust your expenses in order to include a salary for you or this will tell you if you need to push for a raise in prices or an increase in business income in order to include a salary for you. This is why cashflow projections are a key component in business planning even before you think that you can afford it.
Implement a tracking system to record transactions going in and out.
Implementing a tracking system to record transactions going in and out will help you manage and control the finances. Coaches, Consultants and Service Providers without a tracking system will not know your numbers and what’s available for spending or investing back in the business. Without a tracking system, you will not be able to access reports quickly of business finances, which will happen when you need them them the most. This causes the stress and overwhelm with managing finances.
Here’s how you can get started. Automate and streamline with a software such as Xero or at a minimum a spreadsheet that tracks monthly income and expenses by category. This will create a financial system and process while also making it easier to compile and reconcile for tax time and other uses. See my resources on the website for suggested tools for tracking. For more information and guidance on the tools, book a call today!!
Make sure to save for taxes, operations, marketing and other priorities.
Making sure to save for taxes, operations, marketing and other priorities allows you to plan ahead and put away when you get the money instead of having to find the money when you need it. You will owe money at the end of the year if you’ve not set aside or made estimated payments for taxes and that’s the #1 tax compliance issue for most business owners.
A plan for doing this is to transfer money to a business savings for additional set asides like advertising, taxes, annual payments, etc.
Developing a budget and cashflow projections, implementing a tracking system to record transactions going in and out, and making sure to save for taxes, operations and marketing, etc., will help you to not only get paid, but more importantly save for taxes and set aside for recurring expenses sooner than later.
As a business owner, I discovered how important this is and it was a lesson that I had to learn as well. This must be a priority and a part of your system in the very beginning or you will always be pushing and hustling to make money before you can get paid. Remember, Paying yourself first should be the first business and tax strategy for all business owners.
To learn more about how to get paid and other tax and financial strategies, book a call today!!
