Simple Strategies to Achieve your Income Goals.

A business is a business no matter how big or small it is and the purpose of a business is to make money. Even though accounting for a sole proprietorship is not legally required I totally recommend it for management purposes, it will give you visibility on the financial health of your business and help you make informed decisions. 

Let’s Talk About Profit

Surprise, surprise. The profit is not yours!

Yes, profit = income – expenses but that profit not yours, it belongs to the business. You need to pay yourself, and that will part of the expense. I’ll show you how below.

I see a lot of people getting this concept mixed up. Profit is not the leftover for you to take.

One of the first rules of accounting is the Accounting Entity Convention. In simple, you and your business are separate entities. All transactions are recorded from the business point of view.

You can open a bank account just for your business to make the separation clear or you can also keep a good track of it in your accounting software. 

If your business have profit, then you can either reinvest it in the business or distribute to the owners, you decide but it will be a plus.

Remember that we are looking at this from a management perspective not from a tax perspective. 

Management accountants, like me, are forward thinkers. We look at your numbers with an analytical mind to find opportunities, we learn from the past and make recommendations to keep your business on track to meet your income goals. We budget, forecast, set KPI’s, manage cash flow and analyse data to give you a clear picture of where your business stands so you can make informed decisions.

Now you may be asking yourself who do I actually need? The short answer is both. You need someone that helps you with business analysis and look for opportunities to improve business performance and meet your income goals and someone that helps you with government compliance. However, our work will also help you get organised for tax time.

How to make sure you are on track to meet our income goals?

1. Budget!

First you need to set a goal. I suggest you do an overall annual budget and break it down in months. Our templates will guide you on how to do that. 

The starting point to start filling in this budget would be your annual strategy, deep breath and keep reading, nothing to worry about if you don’t have one. We can do it together. 

We are going to think this way:

(plus) Revenue

(less) Expenses

(less) Management fees (you can call this whatever you want to call it but this the money you pay yourself) 

= Profit

If you haven’t set a strategy yet or you are new in business then you can start with how much money you want to pay yourself and build from there, add your expenses and now you have an estimated revenue goal. Then you have clear picture of how much money will meet your expectations and build a strategy around those numbers.

I know tax fee is something that worry us all, so we are going to set aside 30% (roughly) of the profit and management fee for tax expenses, but this will be for our cashflow okay? 

2. Track your Revenue and Expenses

You can do this in a spreadsheet or using an accounting software. There are many accounting programs in the market and some are more user-friendly than others but all of them do the same thing. As long as we are able to extract the data from them and build reports, and as a very least have a Profit & Loss statement, we are fine. 

Here’s what make us, Bookkeeping for Wealth, different. I’ve been working in accounting for 20 year and this is why people hired me, because of the depth and quality of the reports I provided and it’s all dependent on how the data is recorded. 

I call it effective bookkeeping, a bookkeeping that is done with the aim to provide value and clarity for decision-making not to tick a compliance box. Bookkeeping can be very powerful.

3. Run Reports

“You can’t manage what you can’t measure.”  – Peter Drucker

Run reports in your accounting system or in your spreadsheets. Bookkeeping done the right way can give you an excellent intel on different metrics. Depending on the industry you are in, you can set KPI (key performance indicators) and boost the performance of your business. 

For example, you can run reports of who your best clients and send them a special loyalty voucher or if there are any trends on client’s loyalty. The key here is to ask the numbers: so what? So there’s a drop in clients in March 2020; so what? Because Covid-19 – so what?  Price point so what? Can we adjust our costs and offer a lower price?. 

Run a Profit and Loss statement (P&L) that looks exactly like your budget so you can compare both.. Are you over or under? Ask the “so what” questions. 

In the example above the drop in clients means you are no longer able to meet our income target. How much is the impact in revenue? X amount. Can we offer a new service? 

You do a forecast with this new scenario. Then you forecast, adjusting your numbers so you can still on track to meet your goals.

The P&L can also provide information if there is an underperforming service/product so you then can investigate why and decide whether to discontinue,modify it or maybe it needed just more marketing.

4. Value your time 

Measure your time and set a realistic expectation. This is something I used to struggle so much in my own life but at the beginning of the year I made a commitment to become better at it, schedule task and be totally honest with myself of what I can do in a certain time frame. I also thought I have the power of teleportation (ha ha ha), so I need to always take into account travel time, so I’m not late to everything. I’m still not on top of everything but it’s getting better.  I’m using EFT and affirmations to help me with the anxiety that planning give me.

I’m a very responsible person and the thought of being late gives me much more anxiety, so it’s better for me to work on time management rather than to leave it at chance. The secret to better time management is hour blocking, setting up times to do the tasks you need to complete.

Be completely honest with yourself: how many hours in the week can you commit to your business? 

Say you have a blogging site making money from website traffic, it takes you 8 hours to write a blog and upload it but you only have 4 hours a week allocated to that, then you know you can only write two blogs a month unless you outsource it (budget for this and money will come) or you adjust your strategy around it, you can write articles recommending high ticket items or items that gives you high commissions. Only knowing your numbers will give you the clarity to make these type of decisions. 

Find out more and book a quick chat with me to see how we can help you achieve your income goals.