Invest in Jesus by Wendy Knutson, CPA

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As a Christian, I want a heart devoted to God, a heart to speak clearly, confidently and unapologetically about Jesus. I long to lift my hands in praise when moved by a song, unconcerned what others think. I want to generously give God the glory for the good times and feel peace and serenity in times of trouble. I want to be ALL-IN. Imagine my delight to discover God Himself places this eagerness directly in my heart!

He has made everything beautiful in its time. He has also set eternity in the human heart; yet no one can fathom what God has done from beginning to end. Ecclesiastes 3:11 NIV

To me, when Solomon writes, “God has put eternity in our hearts”, it means a desire for God – a longing and yearning for something more, more than we see around us, more than ourselves. What does it look like to turn this longing and yearning toward God?

Maybe it looks like this when Jesus told us our hearts actually follow our treasure:

For where your treasure is, there your heart will be also. Matthew 6:21

Simple enough. Or is it? In The Treasure Principal, Randy Alcorn explains this concept with an analogy. If you buy stock in Google, suddenly you’re interested in Google. You watch the stock price and you read the latest news about Google. If you’re a nerd, like me, you even study the annual report. It’s the same with Jesus, if we invest in Him, we become more interested in Him. But where do we invest in Jesus?

Paul helps us answer the question when he defines the church as the bride of Christ and His very heart:

Husbands, love your wives, just as Christ loved the church and gave himself up for her to make her holy, cleansing her by the washing with water through the word, and to present her to himself as a radiant church, without stain or wrinkle or any other blemish, but holy and blameless. Ephesians 5:25-27

Christ gave HIMSELF because of his deep love for us, the church. He gave it all. There was nothing left to give. That’s what I call ALL-IN! How can we not follow His lead, investing in what is most important to Him – the church? We have a wonderful opportunity to invest in Jesus through OUR church!

When we invest in Jesus, through our church, our heart and love for Jesus naturally grows. How can it not? Pray and ask God to show you how he wants you to invest in your church. Keep your eyes open for opportunities He has uniquely prepared for you. When you sense God’s leading, act, right away. It’s a step you’ll never regret.

How is God working in your heart to invest in Jesus? Have you seen this progression from investment to passion in your own life? Where you’ve put forth the action and your heart followed suit? I’d love to hear your story.

What’s Your Profit First Pace? by Wendy Knutson, CPA

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As Certified Profit First Professionals, we help business owners become proactive to find intentionality in their financial decisions. We also work with ministries to gain greater focus in their finances so they can achieve their vision.

We’ve noticed three different levels at which leaders adopt Profit First (or Vision First for ministries).

Deep Dive

Wade In

Toes-in-the-Water

Let’s discover the Profit First pace that’s right for you!

First, we’ll start with the Deep Dive Pace. The Deep Diver has read Profit First, is pumped up about the possibilities it presents and doesn’t hesitate to implement the Profit First habits. Before we even book their consultation, they have opened multiple bank accounts and started making transfers to their Profit Account. This type of person is an early adopter of new technologies and methods and not afraid to try something new. They think, if something doesn’t work, I can just undo it! Command Z or Control Z is their favorite keyboard shortcut. (If you haven’t figured it out yet, I’m describing myself!) We love the enthusiasm of our clients who take a Deep Dive approach to Profit First. Also, we enjoy being there to give guidance and insight into their (sometimes drastic) financial decisions.

If you have a Deep Dive mentality toward Profit First, be sure your financial decisions make sense. As an example, if you allocated 10% to profit, 15% to taxes, and 15% to owner pay, you would be left with only 60% for operating expenses. In this scenario, you must keep your operating expenses at or below 60%. Otherwise, you’d simply be “borrowing from Peter to pay Paul”.

If the Deep Dive Pace doesn’t work for you, there are more options! Let’s discuss the Wade In Pace. This is the middle-of-the-road approach. We see this pace in a business owner who has read the book but has questions about how to make it a reality. They wait to open their accounts until after we have met and prepared their Profit Assessment. They start at a moderate pace and might ask for our input before making major financial decisions like buying a building or hiring staff members.

If you take a Wade In Pace, our suggestion is to find a guide to help you wade into the waters of Profit First.  Choose a Profit First Certified Professional to hold your hand through the changes that need to come in order to make significant progress.

The third pace is Toes-in-the-Water. This leader is more measured and deliberate with their Profit First decisions. They may or may not have read the book before sitting down to discuss it with us and they are open to the idea of change. We see a much slower pace with adopting Profit First, and that’s not bad! They make intentional decisions to move toward profitability, but it does not happen overnight.

To a Toes-in-the-Water person, we say you should start by moving 1% of your income to a profit account. You won’t miss it. In fact, you’ll be pleasantly surprised at the end of the quarter. If your profit distribution is only enough to take your family out for a pizza dinner, you will have begun the habits that develop into good financial decisions over the long haul.

We don’t feel one pace is necessarily better than the other. In fact, the secret to Profit First isn’t pace at all! The secret is a focus on taking small steps over time. These steps become habits. And the habits generate profits and sustainability. Profit First only works if you work it!

What’s your Profit First pace? How is it working for you? Have you started Profit First yet? If not, call the Knutson CPA office at 817.488.8939 and ask to speak with Lindsay about what Profit First can do for your business.

Tax Day When You Implement Profit First

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It’s tax day, friends! More and more of our clients are adopting Profit First in their businesses. As they make their tax payments this year, we are able to see major changes in the psychology behind writing those big checks to the IRS. We talked to one client who said they mailed a BIG check to the IRS last week. (They owed taxes for 2015 and also their April 15 estimated payment.) They also paid their franchise and property taxes that same day! 

Whew! That’s a lot of money to be sending off to the government in just one day. In the past, this would have sent most business owners into a state of panic or depression.

So we asked this client, how does it feel to make these payments now that you have implemented Profit First in your business over the past year? (For a quick primer on how the Profit First system and accounts work, click here.) They said:

“In past years, when tax day came around, I would do everything possible to avoid paying my taxes. I felt panicked that I had to come up with so much cash to pay the government. If I actually had the money (which I probably didn’t), it was a real downer to see my bank account be drained of funds. But this past year, I implemented Profit First in my business. I transferred the prescribed amounts throughout the year. Today when I had to mail a check, all the money I needed was waiting for me in my  tax account.

I feel a strange mix of emotions today. It’s definitely a different feeling than in years past.

  • Today, I feel glad that I have the funds ready to pay these tax bills.
  • I feel sad that I have to spend the cash.
  • I feel empowered– like I can do just about anything because this worked out so well. I have no fear.
  • I also feel like my business is successful. It has value and it matters in this world, and I feel love for this business of mine!”

Wow! What a difference just one year made with this client. We want to bring this change to your business, too!

Are you still teetering on the edge of deciding whether to implement Profit First in your business? Let’s schedule a time to talk through what it can do in your business, and the peace of mind it can bring – on tax day and every day. Call us at 817.488.8939.

Turning off the TV

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I am a member of a Facebook group where various people recently committed to taking a 90-day challenge. When I saw what others were contributing, I posted:

I’ve been thinking about giving up TV, but I’m not sure…

Why Would I Consider This?

I realized that TV is very passive in nature. It took up a lot of valuable time in my evenings, and the shows did nothing to feed my soul. Instead of spending what time I did have interacting with my husband, I typically vegged out on the couch and fell asleep with my mouth gaping open.

Living the Challenge

It surprised me when several people commented on my post with encouragement for getting rid of my TV. One lady said,

I turned off my TV and sold it three years ago and I have never looked back.

That was all I needed to hear. My thought was out in the universe, and I was all in. Challenge accepted!

As I’ve mentioned in previous blogs, I’m an all-in kind of girl, and at the time, we were doing some remodeling in our living room. So I immediately unplugged the TV, moved it to a spare bedroom and adopted this no-TV rule in my life (with my husband fully on board).

However, football season rolled around, and I’ve always been a big Cowboys fan. So, I decided that I would allow Cowboys games, and that would be the only TV I would watch. (I even updated the Facebook group about this change to my accepted challenge.)

When the pre-season Cowboys game aired, I hooked up the TV and sat down on the couch, ready to watch. However, I fell asleep during that game and when I roused myself to get off the couch, I decided that was a total waste of my time and I didn’t even enjoy it, so there would be no more Cowboys watching for me.

What I’ve Learned

I’ve noticed some positive new habits forming in my life since turning off the TV. For one, my husband and I used to watch TV before we needed to work on things together as a family, like important decisions or paperwork. But now, we schedule time to do those things and get to it right away in the evening when we are still focused and awake. We are making progress on our goals, and we don’t feel deprived because they no longer interfere with planned TV time. It doesn’t feel like a loss to spend time doing other – more productive – things.

Am I legalistic about this? No way! Am I so staunchly dedicated that when I go to someone’s house and they are watching TV, I go to the other room? Absolutely not! Will I watch it in the nail shop? Certainly.

I’m aware that there are some great TV shows out there, even shows that can help you run a successful business. Some examples are The Profit or Shark Tank. But, I’m realizing that there’s so much other good content and information available that my business will never lack.

During this 90-day challenge, I’ve improved my communication skills by talking more with my family. I’ve seen less procrastination in my life because I have more time to finish projects. Also, I’ve been filling that void of time with reading and better sleep.

When it comes to your life as a business owner, are there areas where you are unwisely spending your time?  

  • Fiddling around on social media during the day
  • Distracting staff at your office rather than working on your goals
  • Attending groups that are not edifying or helpful

Have you noticed that if you go test drive a certain car, you will see that car EVERYWHERE! Now that I’m not watching TV, I’m picking up on lots of people out there who don’t watch television. 

There are so many active things you can do to help advance your dreams. There are people you should hang around that will help you and make you stronger. Ensure that the things you are doing are profitable. 

Going Forward

What will I do with the big, fancy TV currently sitting in my spare bedroom? I’m not sure. Maybe I’ll sell it!

Will I go back to watching TV? I don’t think so. There are so many great books to read, podcasts to listen to, webinars to attend, and time to invest in my family. And speaking of investing time, please comment below on how you are investing your time and any changes you have made to how you spend your time!

Really Moving the Needle on Profitability

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In my last blog post, I said that in order to really move the needle on profitability, you must focus on two key areas of your business:

  • Products (the items or services you sell)
  • People (the staff you employ and the people you serve)

Today, I want to hone in on People. It’s been said:

It’s not about what you know but who you know.

That old adage rings true in many situations, including your business. The people you employ and the clients you serve can drive your business and its profitability up, up, up or drag it down to bankruptcy.

STAFF

I can’t overstate that who you hire to do each job in your company is critical to its success. So, take your time in the hiring process. Learn all you can about each applicant, test their skills and knowledge. But most importantly, figure out if they will be a great fit with the culture of your business and if they have the character traits that match up with your company’s values.

When it comes to how the work is getting done by your staff, look for inefficiencies and seek to eliminate them. (You don’t want work being done twice, after all!) You should be encouraging your team to challenge how things are done and bring solutions for better efficiency. (You might even consider giving bonuses to staff who find better ways to serve your customers.)

Jim Collins, in Good to Great, said:

“…Leaders of companies that go from good to great start not with “where” but with “who.” They start by getting the right people on the bus, the wrong people off the bus, and the right people in the right seats. And they stick with that discipline—first the people, then the direction—no matter how dire the circumstances.”

CLIENTS

You have clients who aren’t a good fit; you know you do. When it comes to clients, do an analysis of several indicators to determine if they are the right fit for your company. Look at the “cringe factor” of each client. Do you cringe every time you see their name on the caller ID because you know you’re about to hear bad news? Consider value and loyalty, and whether each client finds value in the services you provide and is loyal to you and your company.

It’s important to realize that the time you spend on the clients who are the wrong fit takes you away from serving the right clients. 20% of your clients will yield 80% of your profits, so it’s really important to filter out the 80% in order to identify the 20%.

If you currently have staff or clients in your business that aren’t the right fit, then it may be time to make some changes to get people in the right seats on the bus. I would love to hear from you about what changes you have made in the People of your business.

Moving the Needle Toward a Profitable Business

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Today, I want to look at the first of two critical components that can really help you move the needle toward profitability.

  1. Products (The Items or Services You Sell)
  2. People (The Staff You Employ and the Clients You Serve)

Why are we talking about products and services? Because they represent what brings in your top line revenue, and honing your focus on your offering can really make big changes (for the better) with your profits!

One of the first steps in adopting Profit First and creating a profitable business is going through the Profit Assessment. I had the privilege of digging into the assessment of MY business with the author of the book himself, Mike Michalowicz. One of the first things he asked me as we delved into the top-line revenue of my business was, “What is the one area of your business- the product or service you are offering- that you know is not profitable?”

During my Profit Assessment discussion, Mike challenged me to question everything and make no assumptions about our service offerings. I have since realized that just because we have always done things a particular way, we did not have to continue doing them the same way forever.

You’ve probably heard it before – the definition of insanity:

To continue to do the same thing over and over and expect different results.

Mike helped us and many other businesses identify products or services that weren’t profitable. In our case, that meant transitioning a service that wasn’t in our primary focus to an expert company that works well with our team. Making this change has helped us center our entire focus on our passion: helping business owners find the missing profits in their businesses.

So today, I’m asking you, What is the one area of your business- the product or service you are offering- that you know isn’t profitable? Are you holding on to a product or service simply because you’ve always done so, or because you assume it’s a standard in your industry? I challenge you to take a hard look at your top line revenue and what it represents.

I would love to hear from you about a product or service offering in your business that just isn’t profitable and what you plan to do about it!

Whittle Down Your Operating Expenses

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Last week, we discussed setting up your Profit First bank accounts. This week, I want to discuss that infamous line item- Operating Expenses.

We hate them. They keep us up a night. They can become like a runaway train. Before Profit First, you wouldn’t really know whether your expenses were too high for your size business. But most business owners have a gut feeling about Operating Expenses, and it usually isn’t pleasant. I doubt I need to do much to convince you that your operating expenses are probably too high!

So now that we’ve just put that out there, let’s say it again:

Think back to when you first went into business. You were creative! You found a way to eek out every dime. You made do with what you had, and things worked just fine. Then, as your revenue started to grow, you added on more expenses: Maybe more staff. A larger facility. Nicer furniture. Better software. And more software. Fast forward to now, and you may feel like your operating expenses are either:

A. Too high.

B. Necessary.

C. Both

Want to know my ah-ha moment about expenses?

Branded water bottles. Yes. Those nifty bottles of purified water that had my logo, contact info and value proposition on them. We originally placed an order for a case of them for a function we were sponsoring (where we later discovered water was already provided). Then, we started buying them for clients who came to our office to meet, because store-bought bottles of water are just so… Ew! Then, we kept on buying them since we wanted to keep our “bulk” rate that we had signed up for. As you can see, this bottled water thing turned into an expense that was completely unnecessary. When we took a step back and priced regular water bottles, whoa! They were a third of the cost of the fancy branded water!

So, what’s your “branded water”? Here are a few ideas we’ve seen:

  • Office space you don’t need? (Maybe you don’t need the fancy office and can scale back a bit.)
  • A crazy amount of snacks you buy for the break room? (Have people bring their own and save yourself some cheese.)
  • Software you are charged for each month but never use? (Get creative with software usage and see which apps you can combine to eliminate some costs.)
  • Vendors that charge too much? (Shop around!)

I encourage you to assess ALL your automatic payments and whether or not you truly need those purchases. I’ll bet you find a few that you don’t need! I want to propose to you than you should get creative again and whittle down your operating expenses. Once you have pinpointed those expenses that are unnecessary, cut the cord! (And please comment below to let me know what items you cut.)

Setting Up Your Profit First Accounts

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In last week’s blog post I likened typical Bank Balance Accounting to a financial gumbo, where all the key ingredients of a business are swirling around in one pot. Then, I introduced Profit First and explained why it’s SO needed in our businesses. I said:

Profit First teaches us that we should take those ingredients out and individually assess them, even going to the extent of setting up separate bank accounts for each of the key ingredients. Then, we work a plan to allocate pre-set percentages to each key area. When we follow the Profit First plan, we can continue with our old ways of Bank Balance Accounting, but we are truly only spending what is AVAILABLE to spend.

Now, let’s dive in!

Profit First teaches us that we must separate those five key ingredients to successfully manage them:

  • Income
  • Profits
  • Owners Pay
  • Taxes
  • Operating Expenses

I am a Certified Profit First Professional and want to run a Profit Assessment on your business! When you come in for a Profit Assessment of your business, we will show you how you are currently spending your money in each of these 5 areas. Also, we will show you what your Target Allocation Percentages, or TAPs should be for your own business. (Each business is different, but businesses of the same size (annual gross revenue after cost of goods sold) should have about the same TAPs.) Don’t panic if your business’ allocations are currently WAY OFF. That’s normal, and perfectly ok. For now. What matters is that you start taking baby steps toward your TAPS. How will you do that, you ask?

Setting up your Profit First accounts looks like this:

  • Income Account– This could be your existing bank account. It’s where all the money comes in, and it’s the place from which you make transfers each month. We will be having discussions about your income streams, your product offerings and your customers.
  • Operating Expense Account– This bank account is strictly for operating expenses. You transfer money to this account two days each month- the 10th and the 25th. You can spend every last dime in this account, but know that these funds are only for operating expenses. While your greatest allocation percentages will be directed here, it may be less than what you are currently spending on operating expenses. We will begin having direct conversations about your operating expenses and ways to trim them.
  • Owners Pay Account– This account is only for your paycheck. Haven’t been taking a paycheck? Now, you will! Even if it’s only 1% of your gross receipts this month, it’s a start, and we WILL get you to where you need to be.
  • Profit Account– This account is important and very special. It’s what I like to think of as the Rainy Day or Opportunities Account. Profit First strongly suggests that you put this account at a different bank from your Income and Operating Expense Account so you aren’t tempted to easily transfer money. The amount that we have you allocate to this account may be small at first, but it will add up over time. And each quarter, you must take a profit celebration from this account (half of what’s in there at the time). This celebration can be used in many ways- to benefit your family, to pamper yourself, to treat your employees- but YOU get to decide.
  • Tax Account– This is what I think of as the Peace Account. When you start putting the correct allocations in this account, and it’s time to pay your tax bill, you won’t even notice. No more stress every March when the IRS was previously draining your account. It’s just taken care of, and you don’t have to worry!

Does this sound a bit daunting to you? That’s ok. I understand. I want you to remember these two words:

As your Certified Profit First Professional, I will:

  • Create your Profit Assessment and work with you to determine your TAPS.
  • Help you set up your new bank accounts in QuickBooks and establish an allocation/transfer rhythm.
  • Remind you of the transfers you need to make and even tell you the amounts every 10th and 25th.
  • Coach you on your progress as you move toward your TAPS.
  • Help you really move the needle toward profitability.

Want more information? Contact my office to schedule your complimentary How Healthy Is Your Business consultation!

Next week we will discuss two ways to really impact your profits!

Financial Gumbo by Wendy Knutson CPA and Certified Profit First Professional

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Last week, I told you how my young business lacked a plan and was held together by Band-Aids and Duct Tape. But then, this marvelous book Profit First came into my periphery.

This week, I want to share more about Profit First.

To recap, the standard GAAP (Generally Accepted Accounting Principles) equation for finances is:

Income – Expenses = Profit

Unfortunately, while mathematically sound, the GAAP profit equation doesn’t account for human behavior. Profit becomes merely leftovers after the beasts of expenses and taxes ravage your bank account. It’s something that is just a glimmer of hope that rarely appears as most businesses struggle on their check to check survival.

But Profit First says the way you look at your business should be:

Profit = Income – Expenses

Logically speaking, the math is the same, but the entrepreneur’s behavior is radically different. With Profit First, you take a predetermined percentage of profit from every sale first, and only the remainder is available for expenses. It’s the old adage, “Pay yourself first”, or as that great little book on finances – The Richest Man in Babylon put it, “Start thy purse to fattening.”

Parkinson’s Law:

Why are you bringing up a law, Wendy? Here’s why: Author and historian C. Northcote Parkinson theorized that our demand for a resource increases to meet the supply of it. That is why when we are given two weeks to do a project it takes two weeks, and when we are given eight weeks to do the same project it takes eight weeks. That is why when given $1,000 to complete our work we get it done with $1,000 and when given $10,000 to complete the same work, it takes $10,000. Profit First makes Parkinson’s Law an asset. By taking your profit first, the money available for expenses lessens, and we are forced to be more creative about how we spend our money.

FINANCIAL GUMBO – A.K.A. Bank Balance Accounting

Most likely you have one business bank account, but really it’s a nebulous gumbo of the 5 key ingredients that make up your business’ finances:

  • Income
  • Profit
  • Taxes
  • Operating Expenses
  • Owners Pay

When all these ingredients are floating around in the same bank account, do you really have any idea just how much you can take in profit, or how much you have set aside to pay the IRS? Do you know how much your operating expenses should be for the month? No, you are flying blind. The old “Bank Balance Accounting” method where you log onto your bank account every day and check your balance is a poor way to make financial decisions, but it’s where most of us are stuck. If what we see in the account looks good, we tend to be a little looser with the check book. If the balance looks low, we panic and do whatever we can to make another sale.

Profit First teaches us that we should take those ingredients out and individually assess them, even going to the extent of setting up separate bank accounts for each of the key ingredients. Then, we work a plan to allocate pre-set percentages to each key area. When we follow the Profit First plan, we can continue with our old ways of Bank Balance Accounting, but we are truly only spending what is AVAILABLE to spend.

Next week, we will dive into how Profit First works, what in the world I’m talking about with multiple bank accounts, and a few ways to whittle down those nasty Operating Expenses.