Manage Your Cash - The 5 Accounts Every Business Needs
How do the successful manage their cash in business? They KISS it. As in, they Keep It Simple, Stupid.
Managing cash is a challenge for business owners. It seems like every time we turn around, there are more bills to pay.
Murphy’s law hits and something goes wrong with your equipment or building and you have an emergency expense. Those seem to occur regularly. Routinely, the IRS dips into our back pocket and must be paid immediately regardless of what your accounts receivables look like.
Looking at our financial statements can be overwhelming. You aren’t an Accountant but you have to lead the business as you make financial decisions daily.
Do we have enough cash?
How do I know?
Your people’s livelihoods depend on the decisions you make to control the direction and trajectory of your business.
Given our goal of controlling our income and building wealth, it often feels like neither are within our control. That doesn’t seem fair. You put your neck on the line to start your business. You worry about making payroll and taking care of your people’s futures. But who is taking care of you?
Let us show you this cash management system so that you can begin taking care of your family and your future.
Open up these 5 accounts and meet with your accountant monthly to manage your cash using these simple rules:
Operating Expense Account: Where revenue comes in and expenses go out. Keep one month’s overhead as a maximum balance.
Profit Account: Account where you set aside personal profit each month.
Reserve Account: Put profit leftover after personal profit here. The maximum balance this account should ever hold is 6 months of overhead.
Tax Account: Match the dollar amount moved into the profit and reserve accounts each month.
Investment holding: Move over money in excess of 6 months of overhead from the Reserve Account. This money is to invest in assets that make money whether inside or outside of the business.
Note: Any time you move money from reserves back to operating, move an equal amount from the tax account.
Concept from Profit First: Transform Your Business from a Cash-Eating Monster to a Money-Making Machine By: Mike Michalowicz
With this system you can accomplish the following:
Keep enough cash in your operating account to pay current bills.
Set aside profit into your profit account to ensure you are benefiting from the fruits of your labor.
Building a fully funded 6 months of expenses in a reserve account to weather almost any storm.
Proactively and conservatively putting money aside to save for taxes.
And putting money aside to invest in the future and BUILD WEALTH!
Schedule a call with us today at www.albertgillispie.com to learn about our workshops where we teach you to implement best practices in business like this!
