business expenses

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Know What Your Numbers Are Telling You

Know What Your Numbers Are Telling You: At Peace With Money

This article is the third in a month-long series on taking care of your finances as self-care. Specifically, I’m focusing on what you can do with your money to take care of yourself and improve your business in 2019. You can read the whole series by clicking here. 


 In the last installment of this series, I talked about how important it is to separate your business and personal finances. Doing so gives you access to a lot of important information about your finances. However, it’s also important to know what to do with that information once you have it. This requires some analysis. Let’s dive in:

Know What Your Numbers Are Telling You

Look back through your financial records for the year. Figure out what products, services, or other sources brought in the most revenue. Identify which months you made your largest and smallest amounts of revenue, so you can understand the rhythm of your income.

Do the same for your expenses. Did you have surprise expenses come up that caused you problems? How can you plan for these surprises in case they happen again? For many people, taxes are a surprise expense. You can plan more effectively once you look at last year’s tax expenses, and prepare for upcoming years. 

Solopreneur Paycheck

Look at your total revenue. Did you pay yourself? Did your business pay you money? If so, move money from your business to your personal account. In the Profit First system, Owner’s Pay and Profit accounts are used to divvy up income and ensure that the owner is getting paid. This is called paying yourself first, an important practice for any business owner. Actually separating your income from the other categories, like savings for operating expenses and taxes, is key to a thriving business. 

Bringing It All Together

By analyzing your finances and gleaning all this information, you are ultimately able to tie loose ends and What Your Numbers Say About Your Business: At Peace With Moneycreate a financially streamlined business. Strategizing to prepare for surprise expenses and taxes, offer more of your most profitable products or services at the optimal time of year, and remembering to pay yourself all contribute to financial success. If you’re interested in doing this analysis work with some professional help, I’m happy to speak with you. Take a look at my service packages and schedule a curiosity call. If this has piqued your interest about Profit First, download the first 5 chapters for free here on my website! I do hope this post helps you find some financial insights into your own business!

Angela

Image Source:  Martin Sanchez

Why Selling More Doesn’t Mean Making More

I assume that when you started your business, you wanted to put money in your pocket. Whether your goal for that money is to use it to fully support yourself or your family, or to fund a particular life goal, your business is meant to supply you with money.  As such, making money by selling product is often the business owner’s most common focus. Enter, the hustle timeline.

The Hustle Timeline

When we first start a business we have to get out there and hustle to sell something; to get things moving. Eventually we start rolling. But at some point we want to make more money, and we believe that growing our business is the way to make more profit.

So, we hustle some more. We do more gigs, we move more product, we sign on more clients. There is more money coming in, but there still doesn’t seem to be enough. Then we set our sights on a particular goal, the gig, the number, the client that’s big enough to put us over the edge so we can put more in our pocket. But it never really happens. Here we find ourselves trapped in the timeline; always hustling, and never quite reaching our goals.

The Answer

There are only two ways to put more money in your pocket: increase margins or decrease expenses. If we are using the same labor, materials or processes as we increase sales we are increasing our output, but not gaining anything. Perhaps we may have even added to our spending to buy that new printer or new app to handle the increase in sales volume. If we haven’t examined our spending, we aren’t gaining anything. Taking a good look at our margins and our business expenses is an important step to upping the profits of our business. 

Why Selling More Doesn't Mean Making More: At Peace With Money

To examine your expenses and profit margins, ask yourself these questions. Is your product or service priced appropriately, or are you undervaluing it? Comparing your prices industry standards can help you suss out an answer. So can calculating in materials, labor, and other costs. If you’re unsure how to price your product or service, do some research to get other opinions and methods!

Are you delivering your product or service in an efficient manner, or are there places you could cut time and expenses? Look at your processes, and be discerning. Have you reviewed your business expenses lately to see if it’s really all necessary?

Ask yourself these questions and review the inner workings of your business. This is where your profit is hiding. Let’s get it into your pocket.

Angela

Image Sources:  Roman Kraft ,  Nik MacMillan

Business Expenses Are Not Free

Business Expenses Aren't Free: At Peace With Money

There is a common misconception among business owners: thinking that “I will write that off as a business expense” means it’s free. Let’s bust this myth! Our business (and bottom lines) will be all the better for it. 

Why Do We Think This?

The root of this misconception probably stems from our experiences as employees of larger companies. As an employee, business expenses are often “free” in that you get reimbursed for them or your company is covering the expense. However, now that you own your business, the expense is included in your bottom line. Business expenses no longer disappear into the ether of corporate bureaucracy – owning a small business means every expense shows up. 

A New Way to Think About Business Expenses

It’s true that as a business owner, you do get a tax write-off for business expenses. But it is also true that an expense is still an expense; the money still leaves your accounts. It’s important that, as business owners, we rewire our brains to recognize this. Business expenses are not equal to receiving things for free. Free stuff is still the best option!

Business Expense Advice: At Peace With MoneyRecognizing this may mean we need to reexamine our approach with expenses in general. When making a purchase, it’s important to ask yourself, “Is this expense actually adding value to my business? Do I really need this?”. Often we are pressured into spending money on our businesses that we don’t really need to, especially when starting out. Evaluating our priorities and finding financial clarity in our businesses can be a helpful step in the right direction. 

As my final tip, I’d like to present a favorite Profit First strategy of mine. Ask yourself, “Can I wait just one more day to make this purchase?” This simple question can again help you in evaluating your financial priorities, and buy you more time to get your business finances in order. 

 


Angela

Images: rawpixel.com , Brooke Lark