A year-end question from your CFO: What financial habit do you have that is no longer serving you?
At the end of a year, we tend to ask ourselves questions about the goals we wish to achieve in the coming year.
I support spending a day with yourself, your financials and a blank piece of paper to set goals.
After you set the goals, be sure to create the plans that deliver the goal. People often don't do that. Laying out the steps to accomplish the goal (there may be a lot of them) and putting them on the calendar, improves the odds of attaining the goals.
Good. Now let's do a little soul searching. Ask yourself this question:
What financial habit do you have that is no longer serving you?
Are you not giving your receipts on a timely basis to the bookkeeper? Are you cancelling meetings with your bookkeeper? Are you commingling personal and business expenses on the credit cards? Are you not paying yourself or paying yourself too much? Are you not setting aside money for taxes?
Are you using your business as a magic ATM?
NOW is the time to get real with yourself and answer that question. For you. And once you have written down the habits that are not serving you, put a goal together to eliminate them. Usually, it is setting aside the time every week or month to focus on your money.
Here are some ideas:
My personal favorite: 1 hour a week on Friday blocked off for Quickbooks, receipts, invoices, deposits, etc. Anything money. Fun Financial Friday!
Book quarterly calls with your CPA now. I like to schedule mine 2 weeks after each quarter is over so that we can discuss my numbers. Forty five minutes via Zoom on a quarterly basis will make a HUGE difference come tax time. I also ask if her she would hold me accountable on keeping to my budget.
Open a Tax Account at the bank that has your business operating expense account. Make it a savings account. Every Friday, slide 15% of the week's income into that account. Just do it. You'll thank me later.*
Open a Profit Account, also at the same bank and slide a percentage (start with 1%) of your week's income into that account every Friday. DO NOT TOUCH THE MONIES IN THIS ACCOUNT. Again, you can thank me later.
Hire a CFO to help you understand and forecast your money. (Sorry, I couldn't help the shameless plug. ) But seriously, think about hiring someone that reviews your financial performance every month with you. It's like hiring a personal trainer to make sure you exercise and stay fit. Same concept.
Create a business budget. Plan how you are going to spend money each and every month. I am writing a blog post on how to do this well. Stay tuned.
We are often our own worse enemy when it comes to our money. The New Year is a great time to set goals and focus on changing our behavior. If you want help, please reach out.
* The separate savings accounts for both Profit and Tax are adapted from Mike Michalowicz and detailed in his book Profit First. He promotes a more extensive system than the 2 accounts I recommend. I support his approach 100%. But sometimes we just need a few simple steps to get started. If you would like a free Kindle version of his book, send me an email requesting it. You can thank me later.