Entrepreneurs are almost always passionate about what they do, developing products, innovating, making customers happy, marketing, sales, et cetera. They often find finance difficult, and they think they can get little benefit from it. The average entrepreneur has no idea how much valuable information is contained in the figures, Hogema writes. Numbers hold the only truth about their business. And knowing and understanding this truth gives them the tools to earn more, sleep better, and work less complicated.
Using this information, the profit advisor helps the entrepreneur determine where he stands, where he wants to go, and which buttons he can turn to get there. The profit advisor helps entrepreneurs manage their money, plan profits, and make financially sound choices to build financially healthy and profitable companies.
Step 1: You help your customer do his bookkeeping 30 minutes a week
Bookkeepers are usually not happy with their bookkeeping. It costs them too much time, money, and energy. As a result, many entrepreneurs bury their heads in the sand for months and ignore accounting as best they can. The solution is as simple as it is complex. The customer needs accounting habits, processes, and systems. If bookkeeping is a daily habit, it requires hardly any time and energy, and then it is always up to date.
Your purpose is to help your client set up the routines and habits that will allow them to complete their accounting in 1 minute per day and 30 minutes per week. Three primary conditions to do this are:
- You must do the bookkeeping entirely online.
- Optimal use should be made of technological developments.
- The processes must be established, set up, and implemented consistently.
When you get this done, the foundation is in place. The bookkeeping is now always in order, without too much time, money, and energy. Now you are going to help the entrepreneur make a profit. Antoine de Saint-Exupéry said it beautifully: ‘A goal without a plan is just a wish. In other words: achieving a good result first requires that there is a solid plan.
Step 2. You guide your customer in making a profit plan
Once the foundation is in place (accounting), the most enjoyable and most valuable work for the customer begins: you will help him make a profit: no taxable profit, but real money, which is leftover. One of the best tools for this is the profit plan: a translation of the company’s goals into turnover, costs, and profit. A kind of budget but profit plan has much greater appeal to entrepreneurs. A profit plan shows whether the entrepreneur is making a profit: whether he is making money from what he does.
Reserve a part of the day to make the profit plan with your customer. It would be best if you had that time. Also, see if you can make this a memorable moment. Don’t sit in a boring office but invite your customer to a beautiful location in nature, with good coffee and tasty lunch. Give your customer an actual VIP treatment. You take him, yourself, and his plans seriously. There is a good chance that working in an inspiring environment will also positively affect your results. Finally, your customer will see you more as a profit advisor than an accountant.
Step 3. You teach your customer how to manage his finances with the help of Profit First
An essential foundation has been laid with the accounting and the profit plan. However, this is not enough for the entrepreneur to make the right (financial) choices and steer for profit. The solution is not to provide more information in financial reports. Entrepreneurs don’t look at it, and when they do, they don’t base their decisions on it. Although? With Profit First.
Profit First is a super simple and accessible method with which the entrepreneur manages his cash flow based on his bank accounts. The method is based on households’ pot system: each financial target has its pot.
Entrepreneurs who work with Profit First have five business bank accounts: one receipt account where all the money comes in and four accounts for the most critical business goals: costs, profit, tax, and salary. It is a controversial method because it does something that makes no sense from an accounting or tax point of view. It often feels nonsensical to financial experts, but it works exceptionally well.
Step 4. The old formula — revenue – costs = profit — is mathematically correct
But it doesn’t work in practice. You encourage the entrepreneur to sell more, but no matter how much income he generates, he always finds a way to spend that money. In addition, the formula allows the entrepreneur to focus on turnover and costs and not on profit. The Profit First formula is turnover – profit = costs. Mathematically nothing changes, but emotionally it does. You must pay the expenses from what is left at the bottom of the line. If the company cannot live on that, something is wrong in the revenue model, or you must do the strategy and work. Taking the profit first is not just a theoretical reversal of the formula with Profit First: it is now something entrepreneurs do literally. Often, they can’t wait to redistribute the money. It is very motivating to transfer money to the profit account and watch this amount grow!About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.