Having a great relationship with your material vendors and subcontractors is critical, especially as your business transitions and grows over time. Making sure they are paid on time is an important part of maintaining those relationships. So we want to show you how to manage your cash flow using our Profit First Cash Management System (PFCMS). Direct Materials: When implementing Profit First , it is important to distinguish between materials used to produce your customer products or projects, and non-direct materials used more generally in your business. We treat the two differently for very important reasons. Direct materials expense always follows the volume…

  What are you waiting for? For those of you not yet familiar with our Profit First Cash Management System (PFCMS), it gives you the opportunity of taking charge of your cash and profitability.  We use Profit First in our practice, and many of our clients use it as well. It works amazingly great… If you’re not yet using it, call us to get more info. It involves setting up several bank accounts where your revenue is apportioned into on a consistent basis in order to make certain that you have the right amount of cash, in the right place, at the right time. When…

Wait What? Am I telling you that you need more than one bank account? Yes, I am!! Remember how our grandparents did finances? The paycheck got cashed, and the money came home and was put into separate envelopes: Rent, Food, Clothing, etc. Well, this same idea can be employed in your business. We help our clients set this up into what we call our Profit First Cash Management System (PFCMS). As money comes in, it gets allocated to various business accounts. The point is to have the right amount of cash in the right place, at the right time. In the basic system…

    Did you see the article about bank financing? If not, go back and read it, please. Ok, are you back now? Great!! Let’s talk turkey (which is appropriate to do since we recently celebrated Thanksgiving). Dealing with banks can be challenging. It seems like they are always willing to lend us money when we don’t need it. And that’s why it’s important to have a good relationship with a commercial lender. So when you need it, you already know each other. But what if you could become your very own lender? Is that even possible, or am I delusional? No, it’s really possible in…

  We are debt averse in general. Borrowing money should be the choice of last resort, not first. But there are times where capital is needed and the business does not have sufficient time to generate the capital needed through its regular operations. In that case, borrowing might be useful. But you’d better have a good reason to go down this road. There are several reasons to borrow money: Business expansion There are two aspects to business expansion:  Asset Acquisition: Sometimes when we expand the business we need to buy some assets like equipment, computers, etc.  Working Capital needs: When your business grows, your working capital needs to grow…

Great question!! And it can be a complex one too… There are two considerations that must be factored in: 1. What are you worth as an employee of your company?  If you needed to hire someone to do all the work you do, how much would you have to pay them? I’m certain it would not be minimum wage, right? You provide much more value than that.  But this is an important question to consider. You deserve to get paid the same or more than you would pay an outside person to do your work. We call that economic compensation. 2. How do I optimize…

Sometimes it’s cheaper (or you have no choice) to pay for recurring expenses (such as insurance or software subscriptions annually rather than monthly.  Now this can mess up your cash flow a bit, but if you plan it right you can get both the savings and a smooth cash flow (see my Top 10 Tips to Save Money on your Software Subscriptions article). A question we often get asked is “how do I get my accounting system to spread the expense out over the year even though I pay once a year?” Here are the steps to do this in Xero (you can…

Well, is it? If you are struggling a little with that let’s talk about how to turn that around. Online businesses have two main challenges: Inventory Management Promotion/advertising Management Really both of these areas stem from the same core problem. What’s that you say? Allright, I’ll just say it again. In order to have a successful online business, you only need to solve one problem. What is that one problem? Cash Management! So what are you thinking at this point? You probably want to ask, “Ok smarty pants, why do you think that’s the problem?” Fine, I’ll tell you… Inventory Management What is the definition of inventory? Most…

  It’s ok, you can be totally honest with me. And I will be honest with you, too.  Most business owners hardly ever look at their financials. There are several reasons for that: The financials are not very accurate It’s difficult to read the financials because they are so messy looking It’s difficult to understand how those financial results ended up on the financials The info on the financials is too old to be useful How in the world can you implement our Profit First Cash Management System (PFCMS) without accurate financials? Answer: It’s almost impossible.  Let’s look at your financials one by one. You good with that? Let’s…

Have you ever thought about this? When your business grows, cash can become strained. Why is that? Great question. That shows your interest is piqued!!   The answer is actually quite simple. When your business grows you need additional working capital. Think about that for a moment. When you hire additional employees, expand your inventory to accommodate more sales, buy additional technology or add licenses. Hey, it all adds up!! So now what do you do? Hmmm… All these things require additional funding. And more revenue doesn’t always provide enough cash flow to fund it when needed.  First and foremost, it’s not like birthday…

Did I just get your attention? I’m very glad I did!! So by now you’re asking how in the world can I make such a bold claim. I can absolutely guarantee it. How? By implementing our “Profit First Cash Management System (PFCMS)". Have you heard of Profit First? Our friend (yes, he’s our friend) Mike Michalowicz wrote a book a few years ago called “Profit First.” I first became acquainted with Mike at a conference several years ago. I was so enthralled with his presentation that I immediately bought and read his book. Then I called up his office to see what…