Your sales minus your expenses equals your profit, correct?
That’s the traditional, time honoured formula for business success, according to General Acceptable Accounting Practices. Mike Michalowicz, with his innovative theory, “Profit First Accounting”, however, has turned what’s “typical” upside down.
According to this forward thinking author and entrepreneur, what you should be doing is taking out your profits first. It just makes so much more sense that way. When you’re in business, profit is your priority, so why leave it to chance, the last thing that comes to mind, stuck out there on the end of the equation?
It’s easy to research comparable companies to determine a reasonable net profit percentage on your projected sales and then that’s the sum that goes straight to the bank. A separate account at a different bank, if you’re smart. Then its out of sight and out of mind.
What is left financially is what you have to actually run your business, and pay all expenses and such, so ultimately, you spend less on all of that because you have less available to spend. Bonus!
Learn more in the pages of “Profit First” by Mike Michaolwicz, or listen with Audible.
Preferred Client Services, Bookkeepers working with small businesses in Edmonton, Sherwood Park, St. Albert, and all surrounding areas as a business partners to make a positive difference to your bottom line!