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IS YOUR BANK ACCOUNT PREPARED FOR THE PANDEMIC?

 

Photo: Getty Images

          If you are like most of the world, you are freaking out about money right now. Maybe freaking out is a bit extreme, but it’s a huge unknown right now. We have no idea how long this virus will linger and what effect it will have on the economy. As I’m sure many of you business owners have experienced, some of our customers have contacted us to have those “hard” conversations. They go something like “We love you, but we have no money”. That may be a very short version of the conversation, but you get my drift. The conversations are hard, not only for them, but for us as well. We LOVE our customers, each and every one of them have their own quirks we cherish. We want them to be successful. They have families that they take care of, grandkids they love to buy cool stuff for and homes they have poured their blood, sweat and tears into. Without their business operational, those things become VERY difficult, if not impossible to hold onto. And without a backup plan, there may be no more business for them.

           Our clients that have reached out to have those hard conversations usually go one of two ways. The First is, “We’re gonna ride this out and see what happens”. The second is “We’re going to take this time to reevaluate our business and come back stronger and better than before”. Are you like customer #2? Do you have that ability? Can you take this time to not earn any money (or earn less than usual) and make your business better? I’d like to hope so, but I know situations can be difficult for some businesses… I have seen my share of scary financials.

           Do you know what it takes for you to stay afloat for 1 month, 2 months, 6 MONTHS? Just for a minute, imagine where you would be right now if you had a healthy reserve. To you, that may be $10K or $100k, but where would you be right now, where would your employees be? You could take the time to be the like customer #2. Your team could be helping you innovate, automate and systematize. What would that mean to them? What would that mean to you?

           I can totally hear you all sarcastically saying… “How am I going to get a reserve like that?” Well thanks to “customer #2” I picked up an old book. I’m not sure how well-known Mike Michalowicz is to the general population, but he is pretty well known in the QuickBooks®/Accounting world.  I have been attending his classes for years at the various QuickBooks® conferences. He’s a great guy with a great idea. His theory is Profit First®. That is why we go into business right? What Mike has done is he has reversed the GAAP accounting method. Your familiar with it whether you know it or not… it is:

Income – Expenses = Profit

            Mike’s formula is:

Income – Profit = Expenses

           To sum this up into a short paragraph… Have you heard of the Envelope System? This is kind of like that, but for business. When you get paid, you divide out your Income to specific accounts. Of course, profit first, then owners pay, then taxes (add whatever accounts you see necessary) and the rest is the money you have left over for operational expenses. His theory is, if you don’t have the money in your expense account to buy something, you are going to either forgo that expense, or “get creative” to make more money to afford it. So, to take that a step further… why not add an Emergency Fund Category. Of the income you earned, what if you had allocated 2.5% of your income for the last 5 years to an emergency fund. 2.5% is probably less than what you are spending on business meals… imagine if that was in a bank account waiting for the next economic crisis. Does 2.5% seem too small… make it whatever you want. You know your needs better than anybody else.

           So here is the hidden caveat… there’s no debt in this system! If you don’t have the cash for it… you don’t buy it. Sounds pretty ridiculous huh? I mean everybody has debt… not true. I have plenty of customers that are cash flowing their entire operations. Crazy right… I don’t think so….

Discipline Makes Millionaires!!

           So, with all that said I am ecstatic for customer #2. Not only are they innovating, automating and systematizing during the pandemic; we are also going to put the Profit First methods into practice with them. I am so excited for them. I have seen the benefit of Cash Flowing a business. Their business is going to thrive; they are going to be smart with their money and this virus will be the thing that changed their lives for the better. So what’s stopping you from being customer #2? There is no time like the present to make a plan, if you don’t know where to start, call us. We will help implement your Cash Flowed Business, plus we can implement that automation you have been talking about for years. As you all know, we strive for automation everyday with our services for you. I’m sure many of you have scheduled an appointment on my fancy automated calendar. Many of you have done online meetings with me. We have a ton of internal automation that is used for organization and storage. Let’s chat, let’s talk about how to increase your profit, lets automate some stuff. I’d love to help all of you be like customer #2, they are some big shoes to fill, but I know you can do it.

If you have some free time right now and want to learn more about this Profit First method check out Mike’s Profit First page

https://profitfirstbook.com/

  He has a bunch of other books he has written and I’m pretty sure he has a new one coming soon. Enjoy!