Small Business Budgeting Tips To Maximize Profit
Profit is the goal of all businesses. The more profitable you are the more money you have to invest in your business and the more money you as the owner can earn as income.
In this video. we’re going to talk about some very simple, but powerful tips that will help you with your budgeting to make sure you’re very very profitable stay till the end of the video to learn about our free guide essential resources that six-figure business owners use daily, make sure to subscribe to our channel and ring the bell to get notified each week.
When we post new videos we talked about strategies that will truly help you become a successful entrepreneur. Would you like to give yourself a raise and i’m not talking about a 3% raise. I’m talking about a 20 percent 30 percent or even 40 percent raise if you run your business with a focus on being profitable the sky is the limit as far as your income goes being profitable is key to earning a good income as an entrepreneur.
Hi, i’m Kristen with six-figure business. Along with my business partner genie we help women who want to start a business or who have started a business and want to scale it and finances are a very important part of building a successful business.
So let’s get to it. Okay. So first and foremost, you need to keep your money separate your business money and your personal money. That is step.
Number one. make sure those finances are separate. you should also set up a business checking account and you can do that at a bank or a credit union. We use a credit at union simply because most banks charge fees and i just simply refuse to pay fees, but you just find the best deal you can and open up a business checking account.
The second thing that we recommend is leveraging technology and what i mean by that is using a bookkeeping software.
So whether you use quickbooks or wave or freshbooks or you need a budget.com,it’s important to use technology to help you keep your bookkeeping in order and it also lets you know at every moment. Where you are financially if you keep your records up to date now, if you’re great with quickbooks, that’s fantastic. If you’re new to business and just thinking about using quickbooks or freshbooks is overwhelming and scary to you.
We highly recommend a software called you need a budget.com and you can use this for your personal finances and your business finances and it’s a tool that’s really really easy to use and it’s a great place to start that’s not to say that down the road you won’t evolve and start using something like quickbooks, but if you’re not using anything currently, please check out you need a budget that calm in the comments below. i’d love to hear what software are you using now? or are you using excel spreadsheets or just old-fashioned pen and paper? we always love to know what you lovely entrepreneurs are doing.
The next thing i want to talk about is the difference between budgeting and bookkeeping budgeting is being proactive bookkeeping is being reactive. So if you think about it when you’re budgeting you’re planning the money you’re going to spend your laying out in buckets. i’m going to spend $200 on marketing. I’’m going to spend you know, a hundred dollars at networking events. I need to spend $300 at staples and office supplies. You’re putting money into buckets. and you know what it’s going to be used for bookkeeping on the other hand happens after you’ve already spent the money. So let’s say you went to office depot and you spent four hundred dollars instead of the $300 you allotted. Well, you’ve overspent your budget amount being proactive and having a bunch of budget will allow you to really look at your money and decide where you want to spend it.
This is so important not just in your business finances, but also in your personal finances every day. We have to make decisions about how we’re going to spend money to grow our businesses.
So we highly recommend you start off budgeting and then you also do record keeping which is tracking what you’re spending and keeping your software updated. So i do our software generally on a daily basis. and so i just like to know where we are with our bookkeeping. and if it gets behind i try to always make sure on friday. I really go through everything in detail. and that’s when jeanne and i make decisions about what we’re going to spend money on whether or not we should cut some cost an example as we eliminated a software. We’ve been using for a while which saved us about $300 a month. so there are things that you can do when you’re budgeting to keep to continuously be proactive about looking at your finances and the decisions you’re making as to how you’re spending your money.
So a couple things i want to share with you is first of all we we watch people spend money on crazy things for example a business that ended up having three different websites done in less than a year and a half and it’s because you know building a website is challenging and something most people haven’t done and it’s hard to get a website that you really love. and then the next thing you know, you have a company calling you saying, hey, we can give you a better website that will get more traffic and you spend money on that website and you don’t get the results you want and then you have another company that calls you and says, hey we can do this and you spend additional money. The bottom line is if you build a good website. Beginning there are lots of things you can do for seo for search engine optimization on that website that would not require you to continue to buy additional websites or to rebuild your website every few months. So in my opinion that can be a waste of money.
So i want to talk about another client who she actually has a really interesting business. She is a translator so she translates for large corporations. She does that like over zoo when it’s actually a conversation. She also does a lot of translation in writing for marketing materials and websites and things like that and she worked for a large company doing that for years and she finally started her own business and she does outsource some work. So she has a good amount of work coming in and she was able to replace her salary pretty quickly, which is awesome. but we had the conversation a few months ago about whether or not she should run an office and the office you wanted to rent was six hundred dollars a month and she could really afford it was not an issue, but we went through the pros and cons about whether it was a good investment to spend that money. What was her roi on that office going to be and that’s always one of the questions. You should ask yourself. You know that thing spend money to make money.
Well, what is your roi if you’re going to spend money? what is your return in investment on that money? so after the conversation i just said devil’s advocate here. What if you spent $600 a month hiring a company to do your weekly email marketing is something you have said you wanted to do but it always gets pushed to the back burner and if you did that. do you think it would actually grow your business and so after the conversation and she thought about it for a while she did decide to spend the money on marketing because she realized in the long run that was going to make her more money than getting an office. She didn’t need an office. She had an office at home. she was just feeling isolated and thought it would be nice to be in an office environment where there were other entrepreneurs and just other people period so that was a choice that she made after the conversation about what is your work? on investment.
So yes, when you spend money you can write it off. You don’t have to pay taxes on money that you reinvest in your business, but it also eats at your profit. you know, your profit is the most important thing especially if you need to bring home an income, so it’s a fine line between should i spend money or not spend money? because if you don’t spend money, sometimes you can stifle growth and that can cost you money. it’s also hard to decide exactly what should i spend money on so you’re always isn’t that balancing act of if i spend money? is it going to give me a good rate of return? and is this the time to spend money but having a very clear budget it having very clear goals. It makes it so much easier to decide those things.
So along with using a bookkeeping software, which is really important. so, you know where your money is every day and every moment it’s also important to keep really good track of your receipts.
Now if you’re using a software like quickbooks, you can actually scan the receipts and keep them inside of the software if you are not like let’s say using you need a budget.com. you can scan your receipts and keep them on just on your computer or you could do something like in google drive you could set up a folder and keep your receipts there. Yes, you can keep your receipts just in a folder just plain old old-fashioned paper, right? he’s hit his foot that outright plain old-fashioned paper. the only problem with paper is that the receipts do fade over time. and if you were to get audited let’s say it your six those receipts may be hard to read so it’s just a not a good idea. If you can just scan your receipts. it’s just a good habit to start and again, it doesn’t have to be anything fancy. you could store them on a file on your computer or you could store them somewhere on google drive if your bookkeeping software doesn’t have a place for them.
So we were just talking about the irs and getting audited and making sure that you have good record-keeping and that you’re keeping all of your receipts.
Another thing that you want to keep in mind is that you need to set aside taxes when you’re doing your budget if you’re self-employed the self-employment tax rate at the time. This video is 15.3% so in your budget, you just know you need to put away 15.3 percent of every dollar you make and then you have federal taxes. I don’t know what federal tax bracket you’re in. so you need to calculate that. Let’s say it’s 25% then 25% of each dollar needs to go into an account for taxes for federal taxes. and the last thing is state taxes. So if you also have state taxes you want to make sure you’re putting money aside for that.
I live in florida. we don’t have state taxes and that makes me happy now. It’s there’s nothing more heartbreaking than working with a client who’s been in business for a couple of years and they’re doing a great job. but you find out that they have a large irs debt, simply because when they started their business, they didn’t set aside money. they didn’t really understand self-employment tax and federal taxes. so if this is something you need help with we’re here to help we want to make sure that you understand how to take care of your taxes because we do not want you to owe the irs money. ultimately, we don’t want you to anyone money. we need to make so much money. you could just pay cash for everything.
The next thing that i feel is extremely important is focus on cash flow whether you’re starting your business today, or you’ve been in business for years, if you focus on cash flow getting money coming in getting new clients making sure that those clients are paying on time driving revenue cash flow is king and you want to stay on top of that and that’s part of what you’re budgeting and your bookkeeping will do it’ll make sure that people aren’t past due. On invoices it’ll make sure that you’re bringing in enough business to cover the expenses and pay yourself a salary.
So always focus on cash flow. it’ll make your life a whole lot easier and way more fun and on that note. I’m also going to link in the description below a video. i think we do have two videos the talk about how to get paid up front. So it tells you how to get your clients to either pay you through a retainer or through monthly billing or choose just take a percentage of your project work upfront. so those are great videos. watch because again, they’re going to help you tremendously with your cash flow.
Jeff be so at amazon says it’s always day 1 at amazon and what he means by that is every day. He treats his business like it’s the first day, you know, when you first start a business you’re often on a shoestring budget, you know, you’re very gun. ho you want to go out and get clients. you’re trying to get your business off the ground and his advice is always act like it’s day one every day get up and act like it’s day one of your business get up with that. Same passion and drive that you had when you started your business get up every day going after the business, you know and making sure that you’re not spending money just because you have money to spend. So when you’re first starting out we often kind of horde some cash because money starts coming in you kind of want to keep the bank account a little padded. He recommends doing that continuously and i think it’s good advice.
My last piece of advice to you is a book. It’s a called profit first. it is a fantastic book if you have not read it i highly the other thing is if you want to use you need a budget.com along with profit first. There’s another youtuber his name is nick true. and he does fantastic videos to talk about small business budgeting using you need a budget.com, which we refer to as wide ab, so you need a budget.com. And he also does a great video on how to use ynab with profit first concepts and we will link those in the description below as well. Great videos great information, highly. and nick’s channel.
So as promised at the beginning of this video janine. i have put together a guide for you and it has great resources that entrepreneurs use on a daily basis to become successful and there are lots of different categories in this guide. we cover some things for mindset we go over some things for financing. We also talked about some tools to use for marketing. so if you would like to get that guide make sure to click the link in the description below and check it out is actually fantastic. jeanne did a great job on that. all right, and last but not least.
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