It was the end of my first full year in business for myself.
When I eagerly opened the email from my accountant, the one that contained the very important piece of paper that states your profit or loss for the year…
I was shocked to discover that I hadn’t made even close to as much moo-lah as I’d expected.
Revenue isn’t as much as I thought I was bringing in.
Ouch, expenses are hiiiggggghhhhh.
(I’d invested in quite a few training programs.)
Okay, let’s look at total profit…
What?! That’s it?! Why the heck am I working so hard to have so little left over?!
As you can guess, lower-than-expected revenues paired with higher-than-expected expense totals left me with a profit that was way too low for my liking.
Keep in mind, as a sole proprietor or a single-member LLC, that profit number INCLUDED my salary because I wasn’t an employee on the payroll.
That meant I wasn’t making enough money in my first year to survive much less thrive.
That was the year I learned 2 very important business boss money lessons that I still remember today:
MONEY LESSON #1: It’s my job to take care of my business’s profitability.
My accountant was a great lady.
She kept my books in order, tracked taxes owed, filed the right reports on time, and made sure I had the financial data I needed to make decisions. But…
At the end of the day, it wasn’t her job to worry about my profitability. It was mine.
MONEY LESSON #2: If I wanted to make more money (more profits, not just more revenue), I had to stay on top of my numbers.
That matters because…
With an up-to-date view of your business’s financial health, you can make better, more profitable decisions like:
- minimizing sense-less investments and overspending in problem areas
- doubling down on selling your most profitable digital products and services
- preparing and saving for taxes owed, so you aren’t scrambling to find the funds at the end of the year
- sending future-securing money to your retirement account
… and my personal favorite:
You know exactly how profitable you are on ANY day of the year with cool feedback tools like the year-to-date profit and loss report.
These days, I do money stuff differently so that I can make more profitable decisions as a business owner. Here are the most important steps I’ve taken so far:
- I’ve chosen an accounting software where I can collaborate with my accountant and view up-to-date financial reports (like year-to-date profit and loss) any time I want.
- I’ve created a partially-automated, fully streamlined monthly accounting routine to keep my expenses, income, taxes, and receipts up-to-date all year long.
- Every month, I review my profitability to make cash-injecting adjustments, to decide on new investment in programs and tools, and to evaluate the pricing of my offerings.
How do you stay on top of your money stuff?
Do you know how profitable you are on any day of the year?
Leave me a comment in the comments below.