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.
