Profit First Success for Small Businesses
I have been singing the virtues of the Profit First ethos for a while now and it appears that more businesses are seeing the potential benefits of implementing such a system to manage their cashflow and ultimately to grow the profits. I thought the best way to get the message across would be to share a quick story with you and show the immediate impact it has already had on a business, that is yet to fully implement the methodolgy.
I received a call from a potential client the other day where he found my details on LinkedIn and discovered that I was a Profit First Professional and wanted a quick chat. He read the book and was totally blown away by how simple the system was and how it could help his business. Once I had recovered from the fact that someone had actually contacted me from LinkedIn, I explained the next step was to set up an online meeting to get to know the exact business issues he was facing, his financial goals for next year and how I could support him implementing Profit First in his business.
He loved the idea that he was accountable to someone to implement this and to make sure he did what he was meant to do every two weeks and to keep an eye on the target allocation percentages. We discussed the target percentages and quickly discovered that his original calculations were not 100% correct and we made sure the tax % were high enough to cover the personal tax liability that was payable on the dividends taken from the business. This could have been a disaster waiting to happen if this was not picked up. We also made sure sufficient funds were being put aside to cover an old VAT debt as this needed to be funded separately from the operating expenses.
The interesting point to note whilst we were discussing Profit First was the tax planning opportunities that were being lost namely, no use of home charge was being paid by the company to the director to cover the cost of using his home for business use, no mileage claims were being submitted for business miles incurred seeing clients and candidates and his partners basic rate band was not being utilised up to the £50,000 limit.
I’m looking forward to seeing over the next few months the increase in profit that is being put aside and the reduction in the operating expenses to enable him to draw a higher wage/dividend from the company. All this is achieved by just keeping an eye on his bank accounts and being motivated to want to change and improve his financial position and prioritising his time so he spends a few hours every 2 weeks to deal with his finances.
I’m now looking forward to meeting his friends, contacts and colleagues to show them how this system can transform their businesses.
If you would like to get in touch with me or any of our other Profit First professionals, click here to find out how we can help.