Small Business Talk
The Podcast to Grow your Business Faster
Why Do Business Owners Find It Difficult to Manage Money With Amy Bett
Show Notes
Background
Amy Bett is a Profit First Professional and founder of Lady Without Limits. Amy is on a mission to educate entrepreneurs on how to set up their bank accounts and manage their cash flow effectively so they are efficient, have visibility at all times and feel in control. In the last 12 months, Amy has helped over 200 business owners to implement this structure into their business and they are raving about their success with comments like, “I wish I knew this 10 years ago,” “I have never felt more organised,” and “finally, I understand my finances. Amy knows the importance of money especially in business.
The Importance of Money
Having money is great, but people seem to shy away from it and they don’t realize the more money they have, the more good things they can do. So, if you’re a good person to start with, money will amplify that. Everybody loves money. Well, not everybody likes to talk about it, but it’s a good subject to talk about. So why did business owners find it so difficult to manage money?
Most business owners started out in business not caring about the numbers too much. They just know they wanted to make money but they are most focused on the services that they are delivering. So, yes, money might be coming in but often times, you don’t really know what’s going in with your business. When that happens, making financial decisions can hurt your business. As a result, you might not get to what you really want to get.
Profit First Method
When you have a profit first mindset, it can really transform your stress levels and your business can go to greater heights. You don’t need to be an accountant or to have a huge history with numbers to do just that. So, you need to know two things – you either have money or you don’t. Having money is great but people seem to shy away from it without realising that the more money they have, the more good things they can do.
If you’re a good person to start with, money will amplify that. It’s not going to turn you into a horrible rich person. If you’re a horrible person to start with, you’re not listening to this podcast. So we’re all good, so we don’t need to go there. And the other thing is that we don’t want to have an expensive hobbies.
We actually want to have businesses and expensive hobbies for a different time and a place and a good business can definitely finance that. So, let’s talk about profit first. Profit First is basically a money method created by Mike Michalowicz and the author of Profit First book. He had a really successful business but lost all the money but came up with this method and it not only transformed his life, but has transformed thousands and thousands of businesses worldwide, which is absolutely amazing.
Have A Separate Bank Account
So the basic principles of it is understanding how to read your financial reports. But then separating your cash flow into the key bank account or buckets that you need to successfully manage a business. Now every business needs at least five buckets or bank accounts, and that’s for your everyday purposes, such as your income, operating expenses, your taxes, your profit, your owners pay.
That’s the five. Every single business owner has those responsibilities to pay yourself to have a profit in the business, to pay taxes, you’re going to have operating expenses and you’re going to have income. Now, by separating your money out in this way, you’re going to have really great visibility of how much money that you actually have to operate your business.
A big problem is that people have got all of their money lumped into one bank account, which leads to confusion. When there’s money in there, they’re like, “Great, I’ve got money and I can often overspend” or actively spend the tax and bonus pay and, you know, on all sorts of things. But when there’s no money in there, they go into panic mode.
When they separate their cash flow, they have a better understanding of how much money they truly have to spend and to protect themselves from actually spending their money in the wrong way so that they can pay themselves and have a profit as well.
Thanksgiving Turkey
In Australia, most people don’t do Thanksgiving, but we’ve got a fair idea of what it is. The Thanksgiving turkey plate is having the turkey on the plate and then everybody getting a fork and eating up on the plate. But truth is, Thanksgiving Turkey means we would all get serving. Either somebody would serve us or we would save ourselves, put it onto a separate plate. And that’s kind of the idea behind the bank accounts is you putting those portions into those different bank accounts so that you can see how much you should be eating, i.e. spending and making sure that there is some left over for things like taxes, super, all the other things that we need to do as business owners.
Shiny Object Syndrome
A lot of people have shiny object syndrome. This is a belief that there always something new worth pursuing or buying. As a business owner, you should stop yourself from engaging with shiny object syndrome. It’s not we’re not trying to give you restrictive budgets. We’re just highlighting how your business is performing. And it allows you to be a better decision maker and decide on the right time to make those purchases rather than just going ahead and doing it blindly.
It’s a good idea to stop and just take that little bit of a break between that excitement, emotion, especially with social media tugging at us before you actually make the decision to buy, because we all know that we can impulse buy pretty quickly. We don’t really want to have buyer’s remorse afterwards, and especially if it’s a big purchase.
Read Your Financial Reports
You don’t need a finance degree to do it. You just need to know the true reports that you need to download and then what numbers you’re looking for, and an easy, simple way to rate them. Because if you can do that, then you can understand the financial health of your business all on your own at any one point. There’s no mystery. You don’t even need to wait for your accountant. If you do this, you can literally analyse any business that comes your way.
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Why Do Business Owners Find It Difficult to Manage Money With Amy Bett
Make sure that you are looking at your numbers for marketing as well as your cash flow – whether it is putting money aside for tax, whether it’s paying yourself, whether it’s going and checking those ads that are possibly running all by themselves.
If you feel out of control with your finances and if you feel like you just don’t you don’t have the confidence with your numbers, please just know it’s not that hard. You can get support and you can change your situation quicker than you could ever imagine.
Enjoy the journey!
Listen to Episode 197 of Small Business Talk for the full details.
