In this third video, I’ll step you through how to set up the most effective money management system (as per the 6 Profit Drivers), so cash-flow becomes stress free.
Please note that this isn’t a custom made financial advice video because I don’t you or your money situation personally but I want you think about the principals and look at what you’re doing and how you can improve to manage your money better.
So this is the usual scenario for most business owners – they have a main working account and a credit card. They bundle all their money in the Working account that goes high and low according to how much does in and out of it.
The key is to set up multiple accounts for different expenses:
– Regulations account – To include your taxes, super and other company taxes. This is to drive money from your Working account to the Regulations account so you don’t have to go onto payment plans with the Tax office. If you manage your money right, you should never have to ask on extensions of payment plans.
This will leave your Working account the expenses that’ll include your lifestyle, loans (personal and business). This is to create a void (taking money OUT of your business) to create demand and urgency to make more sales (more money).
– Business Savings account – As cash buffers in times of need. I had a client who was in the construction business at the time of the GFC. While other businesses in the industry were doing badly, my client had savings. He was able to capitalise in people and equipment. He was in expansion mode while everyone else was suffering from losses.
– Profit re-investment account – For the things you need in your business to grow. When the opportunity arises, you’ve already had money saved to invest and grow the business immediately.
The aim is to distribute an increment of 10% every quarter of your profits to go out of the business. I taught my client this system and he went from making $1.5 million (and only breaking even) to making $4 million in a short few years. He just made over $500k net profit.
The key is to value yourself first when it comes to finances. Stop paying everyone else first before you pay yourself and end up poor.