Profit First professionals like the folks at Exigo Business Solutions can show you the role of Profit First in managing a business crisis. As we commonly tell our clients, using Profit First in your business helps you avoid business failure. And at no time is that more true than during business crisis management.
During normal times too many businesses fail to manage their finances correctly. They have lots of sales and plenty of money coming in but they are not managing their expenses. Because they are still making money, they often decide to expand their operations in an attempt to make more money, thinking that the increased cash flow will solve their profit problems. Unfortunately, they do not take steps to get control of expenses at the same time and the same problem of “entrepreneurial poverty” follows them as the business expands.
Then a business crisis hits. It may be a recession, higher interest rates, shrinking credit, or it could be a major competitor coming into their market. There are various reasons why a business goes into a crisis but in every case the ability to maintain a profit is critical. The basic steps to surviving a business crisis are to assess the problem, devise a sound set of solutions, and enact them in a timely manner.
One of the solutions that you always need to have (or put) in place is maintaining a profit and that is where the Profit First system shines.
If your bookkeeper or accountant does not know how to use the Profit First system it may be time to outsource your bookkeeping to someone who does. The basis of Profit First is that you always allocate part of your income for profit, typically twice a month. And, you segregate your profit from the rest of your bank account or bank accounts.
Profit First makes profit a habit instead of a chance. This is because the system used a modified version of the standard bookkeeping formula. Instead of taking income and subtracting expenses to get profit, Profit First takes income and subtracts profits to get expenses.
The point is that in order to get a handle on expenses and take control of your budgeting and cash flow you need to have effective business practices in place. You can use smart small business accounting software like QuickBooks and even add an advanced business method like Fix This Next. Profit First forces you to attend to long-neglected and typically hidden business expenses.
If you have not been using Profit First, it may not seem like a good idea to start it during a business crisis. However, this may be the best time to start it! During a crisis you cash flow is down and you need to control expenses. You also need to be able to see results in real time. When you have a Profit First Professional like Exigo Business Solutions at your side, you will have to ability to evaluate your financial issues and manage cash flow effectively so that you maintain operating capital while you are sorting out and dealing with the issues that are part and parcel of your business crisis!
With Profit First you get a clear picture of how your business is doing. The system forces you to attend to cost issues from day one and helps avoid the soft of “hamster on a wheel” situation that so many business owners find themselves in. When you do this you will be in better shape going into any crisis and will be better able to manage a business crisis to come out better on the other side.
To learn more about Profit First, contact us today at Exigo Business Solutions.