In the last post, we discussed the business operating system that we use, EOS. This week, we want to look at what we are using to help keep the financials in line. This tool does not merely give us a framework and picture to see and evaluate where our money goes; it also allows us to gain inside into any business to see where they might be overspending.
Welcome to Profit First, a system designed by Mike Michalowicz. We elected to use this system because of the picture that it provides at any moment, as well as because it allows us to start with success, even if it is a minimal amount of it.
Without giving out all the details on the system, we can tell you that this financial management system helps you to set boundaries on your spending and set your business up for success (even in difficult times). It helps you to visualize how much money you are spending currently and start to evaluate where you can increase spending or where cuts need to be made (a more realistic outcome). The system also helps you to establish boundaries with your money. It encourages you to have multiple bank accounts and keep the money you are supposed to spend readily accessible and the money that you are meant to save or have difficulty accessing is harder to spend.
But the name of the system comes from the simple reality that from day one, you have an account that you call PROFIT and you take that small percentage out at the beginning and not at the end. This is also one of those hard to access accounts so that you are not tempted to spend it. This is helpful because this allows your business to be profitable from day 1. In addition to that, you do a quarterly profit distribution and get to celebrate that moment. Your system helps you start on the winning path.
If you are interested in setting up profit first for your business or want to see what the numbers show, you can start with the book found here. Or reach out to us and we will see what the best way we can help is.