Manage episode 271747651 series 2775734
On today’s show, we’re talking about a critical, preparatory step you should be taking for your business. We’re breaking down financial planning for the slow season. Right now, COVID-19 is impacting organizations and institutions across all industries, and it’s important that you’re prepared to handle whatever challenges the Coronavirus throws at you. Jill talks about the methodology she follows, the accounts and percentages she uses, as well as some good habits she’s developed over the years.
The first resource Jill recommends is a book (or audiobook if you’re like Jill) is “Profit First” by Mike Michalowicz. This book talks about a system he created when he made some poor choices that came back to bite him in the butt later down the road. Jill shares with us what she pulled from the strategy Mike has laid out, starting with bank accounts: personal and business.
As far as personal accounts go, you’ve got payable and receivable: where you pay and get paid. Then, you have a tax account (obviously) as well as a tithing account. Now, a tithing account doesn’t necessarily need to have religious connotations--it can be used as money set aside to give to someone in need, a charity you follow, or just doing someone a favor. There are also retirement accounts that we should be keeping topped-off as much as possible to make use of compounding interest. Next, there’s an allowance account: this is money you don’t need to assign to anything in particular. An emergency account is crucial for those moments when every appliance decides to fail. Savings accounts are there to satisfy any need that’s long-term or to supplement your emergency fund.
For business, much is the same. You’ll have payable, receivable, and tax accounts. But this time, you’ll have profit and vault accounts. Profit accounts are a percentage you take from your business to stock away. That way, when you get to take a quarterly distribution, there is money there! Your vault account can be set up automatically to put money away to pay larger-sums; things like annual fees or insurance policies. By doing that, you relieve yourself of the pressure of remembering to pay it and alleviate the pain of money leaving the account! Next, you have investment accounts and saving accounts. Savings accounts can vary and depend on what needs you have for your organization. Make sure to verify any fees that may arise with each account so you can adjust accordingly.
When you’re looking at your percentages, start small, like 1 or 2 percent. If you go too big too soon, you won’t be able to sustain it (just ask Jill!). When you start moving money from accounts, it can be scary to see no money anywhere.