Why Profit First Will Make Everything Easier and You More Money
As a business owner do you:
Struggle to pay yourself a fair wage for the work you do?
Wonder where you are going to get the money to pay your tax bill?
Never have enough money at the end of the month?
Keep taking on additional debt to stay afloat?
Operate cheque to cheque?
If so, Profit First is what you never knew you needed!
THE AGE OLD EQUATION
The GAAP (Generally Accepted Accounting Principles) formula for determining a business’s financials 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 behaviour. In the GAAP formula your share is a left over, a final consideration, something that is hopefully a nice surprise at the end of the year. Alas, the business and you continue on your cheque to cheque survival.
OUR DIFFERENCE
With our method, you flip the formula to Sales – Profit = Expenses. Logically the math is the same, but from the standpoint of the entrepreneur’s behaviour it is radically different. With this method, you take a predetermined percentage from every sale first, and only the remainder is available for expenses.
This means more money in your pocket from the moment you implement the Profit First system.
A Certified Profit First Professional Firm
PROFIT FIRST OVERVIEW
BANK BALANCE ACCOUNTING
Most entrepreneurs don’t have the time or desire 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 you check your bank balance every day and make financial decisions based upon what you see. Generally you will consume what you see in your bank account.
Profit First encourages you to continue “bank balance accounting” by first allocating money to profit accounts so that you see the actual portion of deposits available for expenses and you will automatically adjust your spending accordingly.
DON’T CHANGE HABITS, LEVERAGE THEM
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 you may break your own fiscal rules and spend the money you have.
The Profit First principle does not try to change your habits; Profit First works by leveraging your existing habits.
First, you set aside funds for your profit, hence the name Profit First. And then, you also set aside funds to pay for your taxes and pay yourself as the owner. What’s left is available to spend on your operating expenses. Using the Profit First method ensures you have money to pay the most important employee of the business, you! Not only that, it also allows you to pay yourself for taking the risk of starting the business in the form of profit draws.
LEARN MORE
At Altitude Accounting we won't just provide our clients with exceptional advisory services and pristine bookkeeping records, our firm is also one of the select few that is a Certified Profit First Professional firm. That means more money in your pocket!
If you would like to learn more please contact us today.
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What is Profit First?
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Altitude Accounting’s Gift to you
Start learning the new profit equation that is changing the life of business owners all over the world. REAL profit can be that easy!
