About Katraffik

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Making Room for Financial Clarity

Today I cancelled a domain name that I took out a year ago, because it just no longer fits who I am.  The bookkeeper in me says “Yay me, I just saved money!” But much more significantly, cancelling that domain name is a great reminder in how far I have come in this past year.  Last December, I was running a financially satisfying bookkeeping business, yet I felt I was missing a true sense of purpose.  I have spent this past year on a learning journey to turn my bookkeeping business into an opportunity to serve my clients in a meaningful and even life-changing way.  Casting off that domain feels like sealing the deal – I am firmly on this new and meaningful path and no longer dealing with expenses and hang-ups that don’t serve my vision for my business or my life.

Clearing out what no longer fits your goals or your needs can be important to any solopreneur’s journey. Not only can it tame your expenses, but it can also ensure you are putting your money and attention in the places you really want it to go. Sometimes we need to reflect on our affairs and look closely at what’s most important to us in order to create profitable and more meaningful businesses. This is something I love to do – guide solopreneurs through a financial detective case to find clues which can lead to a healthier financial life. Through creative solutions and openness to unique ideas, creating a pathway towards better finances and better business becomes a meaningful, reflective journey, rather than an intimidating one.

This year has been a process of discovering how to combine my practical business experience with my creativity in order to fulfill my purpose in life – guiding solopreneurs in their own money journeys. If you are open to making room for financial clarity, let’s connect.

Wishing you peace with your money,

☮Angela

By |2018-02-04T23:39:17+00:00January 2nd, 2018|Categories: Bookkeeping Business, Financial Clarity, solopreneurs|0 Comments

Profit First Overview

The Profit First formula is the opposite of Generally Accepted Accounting Principles or GAAP, which determines a business’s profit is Sales – Expenses = Profit.  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.
Sales – Expenses = Profit 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 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. 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.

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 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