Your business is booming but your bank account is looming…around ZERO. What is happening? This is honestly a very common problem.

I was just reading a survey by Intuit: 51% of people who responded to the survey said that accounts receivable and collections were their most significant business challenge. 44% said that cash flow was always something they were concerned about, and getting a better handle on “money in vs. money out” was always a top priority.

I wanted to use this month’s newsletter to explain some of the reasons your profitability is not matching your growth and how to fix it!

Are you blissfully collecting money but forgetting about good, old Uncle Sam? 

We work with clients to ensure that tax payments are made on time or at least saved for later payment.  If expenses and overhead are low and income is high, you need to save more. If expenses take a bigger chunk, taxes will be less.

There is no standard magic number. It depends on your industry and personal situation. Work with a professional and set aside the money monthly, so you aren’t hit with a massive tax bill in March or April that completely destroys your bank account.

One process step we encourage our clients to do – set up a separate account JUST for taxes.  When you receive a payment for a service contract which you know is very profitable, move a portion of that to the separate tax account.

Are you billing a nice monthly retainer but not accounting for expenses and team? 

One of my clients is a professional mover. Seems like a pretty straightforward job, right? You charge someone to move his or her items to a new location and you get paid. The only overhead you might have is paying team members. WRONG.

Gas, van maintenance, payroll expenses, worker’s compensation, insurance, taking clients out for a meal, Networking, organization memberships, travel, sending some of the packages FedEx or other tasks that arise. You name it. There are expenses tied to EACH client and each one looks different. Make sure your rates match your expenses and you are actually making money on the deal.

Are you collecting sales tax and keeping it in your business account? 

You charge sales tax on your product. When someone pays you $1.06, you keep the 6 cents. You use it for operational costs because it’s there and you need it. You’ll deal with paying it back later. BIG MISTAKE.

All sales tax goes to the government and it adds up fast. Every time you receive sales tax, take it out immediately and put it into a different account. Set up the right processes to make sure the client has paid the tax, you know how much it was and where you put it. It saves time, headaches and big bills come tax time.

Are you getting new clients all the time without realizing you’re shelling out commissions left and right? 

It’s fantastic that “Jan” brought 7 new clients to your office. But what isn’t so fantastic is that you’re paying her 20% of sales on each of those and now those clients are costing you.

Do the analysis. If you pay sales people, affiliates, etc. take into account their commission and increase rates, if needed.

Do you realize your rent went up 10% and your cell phone is now $20 more a month? 

Expenses are many and they change often. Rent, office supplies, employees, contractors, utilities, networking costs, membership fees, gas, car maintenance.

Is your client covering the cost? If you drive 50 miles for a meeting, are you charging for the mileage? Or are you keeping track of the miles for taxes?

Look at your entire business through a clear lens. Is there deadweight? What’s bringing you down? Are there clients that don’t pay? Are there clients that suck too much time and energy out of your day? If so, it’s time to make a few changes.

Being profitable is one thing. Being happy AND profitable is the goal.

So, how do you start the path to profitability today?

Reexamine rates. Increase if expenses and supplies are now higher than when you set those rates.

Find ideal clients. Work with people who pay on time, people who want to work with you and whom you want to work with.

Look at your product mix and shift it. Can you create a new package, a new workshop?

Call your clients if they owe you money. It’s YOUR money. It’s not personal. It’s business. Work out a payment plan, do whatever it takes.

Find a professional to assist you with accounting, taxes and payroll. They are experts for a reason. Take the stress away, especially if money and numbers aren’t your favorite thing.

An accountant is a trusted advisor. If you want to work with a team that supports and understands you, reach out for a complimentary call.

Just as you’d hire a life coach to improve your physical and mental well being, hire a virtual CFO and improve your financial health.