Managing Your Cashflow As A Business Owner

Hello, and welcome to this module, managing your cashflow as a business owner and entrepreneur. So this is going to be a impactful module for you because I wish personally I would already knew about this when I first, first started in business. So what this is going to do is ensure that you are able to be in business for the long-term, and you’re able to start building personal wealth for yourself at no matter what level you’re in. I mean, you’re at, in your business. And if you already have a business checking account, you want to pay close attention to this, this module, because it’s going to really shift your philosophy on how to manage your cashflow and really reduce your stress as it relates to your cash and your money as a business owner. So here’s what we’re going to cover. Number one is how to manage your cashflow as a business owner.

Then I’m gonna break down a profit first philosophy. I’m going to get into what accounts to set up when to make transfers, how to pay yourself as an entrepreneur. So on this slide, I’m going to go away and give you just a few tidbits of the profit first philosophy. So essentially when it comes to profit, first, we want to make being profitable a habit. Many business owners fail in business because of lack of cashflow. Now, obviously in this particular course in this system, I’m teaching you how to get funding from the banks. However, we understand that money from the banks is not cash and money from the banks is not free money. And the more cashflow we have, the more we can go out and get in leverage. But the key is cashflow. So in order to completely eliminate being out of business, we have to make managing our cashflow a habit, but specifically putting money away a habit.

So before you go out and people say, oh, if I’ve made a million dollars, I’d be good. No, you won’t. Because all you’re going to do is if you’re mismanaging your money at $10,000, you’re definitely going to mismanage your money and a million dollars. You’re just going to mismanage it at a higher level. So I rather, you start off with a thousand bucks, 5,000 bucks, 10,000 bucks, get the habits down packed. And then once they’re habits are in store and you’re doing the habits, you’ll do them automatically. So essentially what I’m saying is profit first needs to become a habit. Being profitable is a habit, managing your cashflow effectively is a habit, and then paying down your credit cards and leveraging cash and the bank’s money is a habit. Now, how do we do this? So all income and revenue is going to go into your business checking account, and we’re going to call this your income account.

So if you’re already an existing business owner, you probably already have this account set up already. And this is going to be where you keep all of your transfers going. Whether for some Stripe PayPal, somebody pays you, you have affiliate commissions, anything, any type of income related to your company needs to go into your income account. And then we’ll want to do is for gross revenue received between the first and the 14th of the month, we’re going to make transfers into an account and two of the following accounts below in the 15th of the month. And then the same thing holds true. So for gross revenue between the 15th and the last of the month, we want to make the transfers in our income account on the first of the following month.

And then what we want to do is make sure before we make the transfers between the first and the 15th, we want to make sure we subtract any chargeback and refunds, merchant account fees from gross sales and revenues. So typically depend upon your merchant account. I know mine’s automatically removes refunds and chargebacks and the merchant account fees. So I technically don’t have to do this. So if you’re using Stripe as an example for your merchant account, this is already going to be done for you, but generally speaking, this should be done, but this is just like a piece of like a general piece of information there. So if you have to manually make a refund from your checking account, once you receive the transfer, then you will want to take you to this information. So this is how this is going to be set up, first to the 14th, make the transfers on the 15th, 15th to the last day of the month, make the transfer on the first.

And here’s how it works. So again, we’re going to have our income account. So you want to open up an income account. And if you already have a business checking account, you want to earmark that as your income account, now all income flows to this account. Then as I just stated you want to make transfers. So the first transfer you want to do is you want to establish a profit account, okay, this can be a savings or a checking account, and you want to transfer a 20% of all gross revenue, not net, gross revenue from the income account to this business, same as account called the profit account. So let’s just say you made $10,000, $2,000 needs to go to the profit account. If you make $50,000, 10,000 of that, 50 needs to go to the profit account. Then what you want to do is transfer 15% of all gross revenue from the income account to your personal checking account.

So you probably already have personal checking accounts and that 15% of whatever that revenue is, is going to go to you personally as an owner. Okay? So to keep this extremely simple, if it’s $10,000, you’re going to transfer $1,500. If it’s $50,000, you’re going to transfer. I want to say 10%, 15% of, I think that’s 6,500. I think I’m not sure what it is. I’m just going off the top of my head, but you essentially want to transfer 15%. Now, this is a random tangent, but it’s relevant. Now, many entrepreneurs try to figure out when should they quit their job? Well, you should quit your job, when you make the 15% transfer, when that is enough to cover your monthly expenses and savings goals. So once, this amount once, so let’s just say you’re making 50K a month. 10% of 50 is 5,000.

Then 5% of 50,000, I want to say is 2,500. So I guess that’s 7,500. So assuming that 7,500 is enough to meet your funding, your personal financial goals, you want to consult with your tax advisor, your financial advisor, your bookkeeper, to make sure that you’ve got a handle on this. But once that amount is enough for your personal expenses and savings. At that point, you should quit your job, but you want to essentially make 15% transfer to you personally. Okay? And then what you want to do is you want to put 15% of your gross revenue and you want to transfer it to a tax savings account. So again, going back to that same example, whether it’s 10,000 1500, 50,000, 7,500 goes to your tax account, and then you want to transfer the remaining 50% into your operating account.

All right? And this is how you want to continue to operate. So we’re looking at $5,000. If it’s $10,000 in gross revenue going into your operating expense account. And then the rest of the percentage is going into the appropriate accounts. Okay? Now chances are, you’ll want to keep a couple of thousand dollars in your income account, but your income account is going to be ebbing and flowing ebbing and flowing ebbing and flowing. And the reason why you want to do this is it’s forcing you to be intentional with profit owners, pay taxes and operating expenses. And then you essentially want your business to be operating at a 50% margin or 50% expenses. And that’s really where all your other operating expenses are going to come from. So when we look at this, you can use this account for operating expenses for expenses and payroll.

So this is going to be, if you have staff, you’re going to pay them from the operating account during the pay periods. And during these pay period, you’re going to pay yourself. So the first of the 14th to be paid on the 20th or the first and the first of the 14th to be paid on the 15th, whichever you prefer. Okay. But if you do first, the 14th, you paid on the 20th, all invoices, all payroll. If you have invoice, if you have independent contractors working for you, employees working for you, you want to make sure that all of that stuff is sent over to you. So that way you can approve it on the 16th. So that way, if you put an account manager in place or bookkeeper in place, they can make sure payroll was submitted, and then they’ll be able to be paid on the 20th in this example, okay, this is just like a general rule of thumb.

You don’t have to follow this verbatim, but essentially what I’m saying is you want to standardize when you make the transfers and then when you make the payments. So it doesn’t have to be the 20th of the month. It could be the 17th of the month. It just needs to be standardized. Okay. And then the other thing you want to make sure you do is the 15th to the last day of the month to be paid on the fifth of a month in this example, and then a CEO, i.e you, must approve invoices on the first. So that way the account manager and bookkeeper, if that’s what you have in place, which I would recommend you do it, they can submit the payroll on the fourth of the month. And then the independent contractors will be paid on the fifth of the month.

Okay. So essentially we’re always making sure that we have enough cashflow to make payroll and pay ourselves. Okay. And then the account manager will email and attach spreadsheet of your payroll, basically saying, Hey, look, these are the, these are the things that we’re going to pay for this particular scenario. You look at it, you look at the, the transfers, you look at the payroll, make sure it all looks good. And then the expenses are going to be paid. And what this does is it really, really makes you be intentional about not having unnecessary expenses. And also what you want to do is you as a CEO, you want to improve account manager via email. You want to approve the payroll via email on the fourth and the 19th of every month. If that’s the rhythm that you have. So transfers may between the first and the 14th.

I mean, deposits maybe the first and the 14 makes that transfer on the 15th. That gives you guys a few time, a few days to make sure everything is approved. Then once it’s approved, make that transaction happen on the 19th. So it can arrive by the 21st in this example. Okay. And you want to make sure you have cutoff times, so that way it’s standardized, and this is a part of your role, okay. As CEO or as account manager. So here’s another thing that many people end up. Remember I talked about the high-income skillset. So you are the CEO, but you may be performing in a role of sales rep. So if you are performing in the role of sales rep, you want to be thinking about the end in mind. At some point you are going to end up hiring a sales manager, and you’re going to end up hiring a sales rep.

And you’re going to have specific commission structures for your sales rep and your sales manager. So for example, our commission structure is I want to say 12% on any money generated with a bonus structure. If you’re a sales rep and then a sales manager will get 5% override. So in that example, let’s just say you’re selling as the CEO. Well, that would mean you’re going to receive the sales manager and the sales rep commission on the sale, in addition to your profit sharing compensation. So the sales manager, nor the sales rep will receive any commissions, if you don’t have any, but essentially if you’re acting as sales rep and sales manager, you want to go ahead and start putting that in place. However, you must, as a CEO submit that invoice or that particular transaction during that pay period, in order to receive that commission and the account manager will send the CEO a separate bill or a separate payment for this, for, for your particular payment.

Okay. So this is huge to understand. So if you are the CEO, but you’re operating in a role, you want to pay yourself specifically in that sales rep role. Now, the other thing you want to do is profit distributions. Now, I haven’t done this from, from a standpoint of distributing to my personal checking account, but I’ll cover this. I’ll just transfer it to another savings account. But essentially what you want to do is on the first period of a new quarter. So January 1st, April 1st, July 1st and October 1st, you want to transfer 47 and a half percent of the total amount found in the bank account and the profit account to either your personal checking account, which I wouldn’t recommend your personal checking account would recommend some other type of holding account, possibly a another savings account or a separate account.

Maybe like, if you get into a planning, a trust account, but essentially you want to make that transfer to that account. And it’s separate. So because you know, depending upon how big your profit gets, you might be transferring over like two, three, $400,000 and it might be a lot to transfer and then you have to consider taxes and all this stuff, but you want essentially transfer 47.5% of that money to a separate account, to start building up a net worth of the company or your personal net worth okay. Then you also want to separate from the profit account. Okay. On that same quarter, you want to transfer 47 and a half percent of the total profit to a separate bank account in the profit separate amount from the profit bank account to a separate business savings account called business savings account or working capital account.

And you want to make that transfer on the same pay period as well. So essentially if you have a hundred thousand dollars profit over that quarter, you’re going to transfer 47 and a half percent or $47,500 to your personal bank account, a trust account, a separate savings account, any type of account that’s going to help you start building your personal net worth, or even just another business savings account for working capital. So if you find yourself in the growth phase, you may just transfer a 47 and a half percent of that back into a marketing account, because you know that every time you put money in marketing, that essentially helps you revitalize the business. That’s really what I do essentially. And then you can transfer that other 47.5% to another, not your profit account, but another business savings account that you’re going to be able to, you know, continue to grow a working capital with.

So think of it this way, right? So like I was saying before, when you’re in high-income skillset phase, the best thing you can do is invest in yourself. So if you’re transferring 47.5% of the money in your profit account, and you’re still trying to get yourself up to 10 grand and there’s a course or, or training or something that you can, that you want to invest in, I would recommend taking that percentage and then investing in that course and then taking the other percentage, the other 47.5% and put it in a savings account, or if you’re past that phase and you’re in scalable business phase, instead of putting that 47 and half percent of profit from the profit account to a separate investment or savings account, it might make more sense to reinvest that profit back inside your business, because that business, you may be at a place where you’re scaling in putting that money somewhere else may not make sense.

Case in point, I’ll put $50,000 in the stock market. And I did it under the leadership of someone I’m learning from. And, you know, when I looked at the $50,000 that I put into the stock market, as of yesterday, as I’m recording this, I think it’s, as of yesterday as the recording of this video, I put $50,000 in and I’m at 43,000. I saw I’ve lost $7,000. Okay. Now I’m hoping it goes back up. But then I put the same $50,000 in ads, okay. Back into the company, scalable business phase. And that $50,000 returned over the same period of time, $150,000 in cash and $283,000 in revenue. So why wouldn’t I take that money and reinvest back in the business in this example? Okay. And then I put the other percentage. So again, I’ll put the other percentage in a stock market account, which I’m probably not going to do that anymore.

Right? Because again, the best investment for me is scalable business, right? So I hope this makes sense when it comes to the profit distributions. And I didn’t go too in depth, but I’m really giving you the philosophy on how to think. Because again, when you’re in scalable business phase, the best investment you can put make is scalable business. Now, the wrap this loop up, the reason why I invested this money in the stock market is because I want to prove when we, when I finished the First Gen Millionaire program, that you can make money in the stock market, but you just want to be strategic with how you make money in the stock market and you doing it for a buy and hold scenario. But again, in my opinion, my best investment is my business. Now, the other distributions transfers. So we’re making those transfers.

All transfers need to be made manually, and reports need to be provided to the CEO by 4:00 PM on the second and 16th of every month, detailing the following along with payroll report. Now nine times out of 10, you’re going to be the one doing this. And I still do this to, in my business to this day. I’m probably at some point going to release it, but I wanted to get myself in a habit of doing it and documenting the entire process. So you want to make sure you have a date in the amounts of the transfers, assuming you’re not the one doing it. You want to also want to know the payroll amount for, for any type of approval. So if it’s, if you’re, if it’s your name, you want to look at that name and put your name there. Then you also want to make sure you have the bank account of each.

You want to have the bank balances for each of the above accounts after the transfers have been made so that way you can ensure. So nine times out of 10, if you’re the one doing this, you’ll have all this, but if you delegate this, you’ll need to have that specific information. So if transfers fall on a holiday, then you want to schedule the transfer for the next business day. So for example, if it’s Memorial day weekend, you want to Memorial day Monday, you want to make sure you make that transfer on that Tuesday. And then if the transfer lead to an NSF fee, or you see a bank account with a negative balance, please email yourself or maybe just make sure you don’t put yourself in a scenario where it’s negative. Okay. And this is really when you start the team up and make sure you transfer the details, transferring X from payroll account on the 15th.

So that way it’s very clear as to why you’re making that transfer. So if you notice a negative bank account, which chances are, you won’t have a negative bank account, you want to transfer revenue from the profit account as your first course of action. And if there aren’t enough funds in a profit account, then you want to transfer funds from a separate business, same as account. Alright. So essentially if your income account, which that’s probably going to be either the income account in my experience, which my income accounts never gone negative, or my, my operating account, but chances are either be your income account, or your operating account. What I typically like to do is keep a cushion in both of those accounts. So that doesn’t happen. But if it does happen to you, because you’re just starting out, then you want to take that into account.

So I would recommend you already have some money in your savings account, and in your checking accounts. And then you look at the previous 30 days, and then you start doing this as a previous 30 days, which would mean you already have money from the time before that, if that makes sense. Okay. So as we’re wrapping up here, the whole goal is for you to reduce your operating expenses as much as possible. So this is where you’re basically going to figure out, okay, how do I operate at a 50% margin? Well, you got to go through your expenses, right? You want to look at if you’ve overpaid or underpaid in any type of operating expenses. And then you want to make sure you can look forward and look at and review each and every month or each and every quarter to view, Hey, look, am I putting too much money towards this particular operating expense?

Do I have the right people in the right seat? So I have a right systems in place. And for example, if you, as the account manager or you have an account manager or a bookkeeper, and notice that you spent 34% of your revenue on payroll, but only 30% is allocated towards it, then we’ve got to make an adjustment from the tax operating expense account. So generally speaking, I just have my operating expense account and payroll account in one, but under no circumstance you reduce or subtract target percentage from an owner’s compensation or the profit account, you know, and then on January 1st, if you have access reserves, essentially once you get into your planning, if you have excess reserves and the tax or operating expense account, or the payroll accounts, then 95% of the access accounts should be transferred to the profit account for the next quarterly profit distribution pay on January 1st.

And then again, the other unique thing about this, a profit account, right? Is that not only can it be used to profit you, this is also what you’re going to use for when you start building out a team and you want to start paying out bonuses, okay? Because you can look at how the profit worked and then you can allocate based off that profit percentage, not only are you trying to reinvest back in your business, if you’re in a scalable business phase, like I was saying back in marketing, but you can also make sure that your team members are clear about making sure operating expenses are taken care of. They’re reduced as much as possible. Then you can start looking at that as a bonus structure as well, based off that quarterly bonus and or that annual bonus, whatever you guys decide to come up with, but this is how you want to manage your cashflow as entrepreneur. I know it’s really, really detailed, but it’s really, really helped me. And one other thing I’ve done for you is right below this video, you’ll see a spreadsheet. Okay. And this spreadsheet, is this an example? I just have May 1st of the 15th and then May 15th or the 31st. So you’ll see that you just put your deposits in your account. You put your deposits on those that you received during that pay period, right? So you can see the total. And then what it’s going to automatically do is calculate 20% of profit, 15%, 15%, and then operating expense. So you can see, all right. So once I see all of this, I just need to make these transfers here.

Right. And then the same exact thing holds true. So you just put all your deposits during that timeframe, and then you just, once you make the deposits, you’ll just, it’s going to automatically calculate, right? So I’m just going to take this out. And you’ll notice that if I did, you know, $50, $500, $5,000, $10, $1 actually not 50,000, let’s say you have 50,000. You say, y’all get a $50,000 check. You can see that it’s already taken out what my distributions need to be, and it’s already here. Okay. And that’s how you want to do it. So make sure you come up with your file, make a copy, and you just want to start implementing this ASAP. So as we wrap up here, if you haven’t already opened up those business checking accounts, you’re going to definitely want to have an income account, a profit account tax account and operating accounts. So you want to have at least four, business accounts, two of them being checking accounts, so operations and operations income needs to be business checking accounts and taxes and profit needs to be business savings. Okay. So hope this video helps take immediate action with these accounts and I’ll see you in the next module.