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9-Steps To Find Hidden Profit Within Your Business

Open a SEPARATE Bank Account - If you donít already have a separate bank account for your business, do that today! You donít have to incorporate or get a tax ID number to do this. You can open a simple sole proprietorship account in the DBA (doing business as) form using your Social Security number. You donít even need the big business checks, just a simple checkbook is fine. Every single penny of income from your business goes into this account, and all expenses from your business come out of this account. Do not use your personal account for anything related to your business and vice versa. This creates a simple profit/loss statement and as long as you commit to no cheating, your checkbook balance shows your business profit.

Withhold 25% for Taxes - When you pay yourself a wage from your business account make sure that you put 25% of that amount into a ďtaxĒ savings account. This can be a basic savings account or a money market savings account (a fluid account with no penalties for withdrawing your money, you need to be able to take it when you need it) that is only used to house your tax money to pay the IRS when your taxes are due. For example, if you withdraw $2000 from your business account, $1500 would go to you and $500 would be deposited into your tax savings account.

Create a Budget - A budget projects or forecasts your income and expenses and gives you an estimate profit amount. Your first few budgets wonít be perfect as surprise expenses show up that you forgot to put down. But as you continue creating your budget each month it will get more precise and work better each time. Usually, by the 3rd month, itís getting pretty close to working smoothly. Budgets are key, as they give you a clear picture where your money is going and where your expenses may be too high. This, in turn, can help you streamline your expenses and create more profit for your business.

Avoid ĎUpgradesí - As you start to make money, resist the urge to go out and purchase the latest software, equipment, vehicle, etcÖ just because you Ďneeded ití. Especially if you canít pay for it with cash. Profitable and stable businesses avoid buying toys for emotional reasons or to impress others. Itís ok to buy the nicer items, but only with surplus income and cash.

Donít Borrow Money - All businesses will make mistakes and have failures. And if you go into debt and borrow money to invest in those business ideas you will go out of business. A failed business venture when you are paying for it with cash will only set you back in your business growth, but if youíre using debt to grow your business and the business idea fails youíll be buried under a mountain of debt. When your business has no debt your profits are actually higher, because your income isnít split between expenses, debts, and profits. When you donít have debt your income is only split between expenses and profits and if your expenses are kept low you have increased profits.

Donít Use Credit Cards - Save up for your large purchases. Everything can be purchased with a debit card or cash. Rent, outsource or buy used with cash. Grow your business slowly and eliminate the risk of growing too quickly and having your business fail with a mound of debt to show for it. Or lose profits paying the interest fees.

Save Money for Retained Earnings - Retained earnings are used for: emergencies, investing into the business, and capitalizing on opportunities. The ideal goal is to save up 6 months worth of daily operating business expenses. This needs to be in cash form that you can get to easily (savings account or money market savings account that you can withdraw from without penalties). This savings helps you weather the emergencies, the lean months, gives you capital for growth, or bargain/deal opportunities.

Give Generously - Generosity is the hallmark of successful businesses who are winning with money. Generosity takes the focus off yourself and turns it to those around you. When we give it changes our way of thinking by giving us a sense of contentment.

Hire a Bookkeeper - By hiring a bookkeeper you can spend more time doing what you enjoy doing in your business. Especially if you are already struggling to keep your books current, your books arenít easy to access or not in a format that is needed for submitting your taxes. Bookkeepers can simplify and create order in your books so you can quickly tell the health status of your business, know whether or not you are making a profit, and what areas are draining your business.

I know the list seems simple at first sight, but many business owners struggle to solve these challenges on their own. Iíd love to hear from you and discuss these 9-steps, how they relate to your business, and the struggles you have with disorganized bookkeeping, desire for more order, and time to do what you love.


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Website designed and maintained by: Jessica Howard
Last revised: November 26, 2019