CashedUp Book

A Cashed Up Business

A Cashed Up Business

Everyday business owners ask us “how do I get Cashed Up?”  We work with many businesses who are already well on their way to getting Cashed Up, but most are either drowning or just keeping their head above water.

My reasoning as to why so many businesses are so cash poor is because they don’t know their numbers – they are driving blind. Most business are started by very skilled technicians (an accountant, a PT, a psychologist, a Videographer, a Financial Planner, a Physio etc) with very little mastery in the key areas of business - sales, marketing, leadership and most importantly NUMBERS.  With no insight into numbers that matter, no advice from numbers people (accountants) and no knowledge of the how to create the numbers you want, it is no surprise to us that 3 in 4 businesses fail.

As a result of not knowing your numbers, most business owners -

  • Give half their profits to the tax man, unnecessarily.
  • Have revenue but wonder where the profit went.
  • Come up short when bills are due.

So whether you are financially “drowning” or only just keeping your “head above water”, your primary job as a business owner is to get Cashed Up.  That means pulling more money, time and happiness from your business.

Everyone reading this has an opportunity to start again with a new sheet of paper and a new plan. You just need the desire to change and the courage to action.

So, if your business was Cashed Up here’s what would be doing:

 

Capture Your Profit

In a world where we spend what we earn, protecting your profit is essential.  If you don’t have a profit improvement plan, regardless of how much money you earn, you will always struggle.

  • You’d get rid of any team members who you’d answer NO to the following question - “Would you enthusiastically re-employ each of your current employees?”.  One or two team underperforming team members could be chewing up $150k annual profits.
  • You would be earning at least $250,000 or more revenue each year for each director in the business. Any less and you’ll struggle to take a decent profit.
  • You would have a separate account (other than your main operating account) where you put no less than 15% of revenue aside for Tax & GST.
  • You would have another separate account (other than your main operating account) where you put at least 15% of revenue aside Profit.
  • You would be profitable by the end of this year.  If not, shut up shop and get a job.
  • You would only pay your fair share in tax.  Not a cent more!
  • You would donate at least 10% of your profits to a charity, a church or causes dear to your heart.
  • You would consider yourself to be highly rewarded financially for your industry.

 

Control Your Cash

Simply growing your business is no longer enough, if you want to escape the cash crisis permanently.  You need to get paid faster and be in control.  In a time when “Cash is King”, are you ruling it or is cash ruling you?

  • You would receive part or all of your revenue before you deliver your product or service.
  • You could tell 3 months in advance if there will be a shortfall or excess of cash.
  • Your revenue would come mainly from recurring sources (retainer, subscription, repeat order)?
  • You would easily pay a BAS or Tax bill in full and on time, using money in your 15% tax reserve.
  • You would pay everyone on time.
  • Everyone would pay you on time.
  • You’d have 3 x months of Operational Expenses in an emergency rainy day fund.
  • No one client or customer would represent more than 20% of your total revenue.

 

Check Your Numbers

Business owners who know their numbers have a tremendous advantage over those who do not. Your financials tell a story - and understanding the story behind your numbers can be one of the most important ingredients for long-term success.

  • You wouldn’t have to push your accountant for responses or ideas.
  • You would have a real time business performance dashboard on your phone.
  • You wouldn’t be afraid to call your accountant for quick phone calls, emails or meetings, out of fear of getting slapped with a bill.
  • You would know your numbers.
  • You would use Xero.
  • Your bookkeeper would keep your accounts perfectly up to date by the 3rd of each month.
  • You would sit down with your accountant in april each year to plan a significant tax saving. We’re talking tens of thousands in tax savings each year.
  • You would be 100% up to date with all of your ATO payments and lodgements.

 

Cover Your Assets

Operating your business through trusts and companies is the easiest way to stop giving half your profit to the tax man and start protecting your house, car and livelihood.  Businesses with the right structure and strategy keep more of their hard earned cash.

  • You would operate your business in a trust and / or company.
  • You would review your structure with your Accountant each year for tax efficiency and asset protection.
  • You would fully understand your structure, be able to draw it and understand the best way to take money out of it.
  • On paper are you would be worthless.   Everything in your spouse name.
  • You would know the differences between Companies, Trusts & Sole Traders.
  • You would know the difference between a salary, a dividend, a distribution and a loan.

 

Concentrate Your Value

Most business owners actually own a job not a business.  Once you have an idea for what your business is really worth and you understand how to increase that valuation, making more profit becomes easy.

  • You would have a current business plan that you and your team review each quarter.
  • You would absolutely love working with every one of your  clients / customers
  • You would fire every client / customer you don’t love working with
  • You would have thousands of dollars a month appear in your bank account, seemingly magically, from recurring sources e.g. monthly subscription.
  • You would have a recent independent valuation for what your business is worth.
  • You would have have systems & procedures in place for how things are done in your business.
  • No more than 20% of your revenue come from just a few key clients / customers.
  • You would have already said NO to an offer to buy your business.

 

Compound Your Wealth

Turning your business profits and cash into wealth is the fastest way to avoid the time for money trap and spend more time doing the things you love.  The process is simple, rewarding and liberating.

  • You would accumulate and protect your wealth in a SMSF (Self Managed Super Fund)
  • You would max out yours and your family's annual super contribution limits.
  • You would implement a debt recycling strategy using a split loan to pay down non tax deductible debt first.
  • You would use credit cards to earn you a family holiday each year but pay off the balance in full every month.
  • Your net wealth would be at least $500,000 and growing….
  • You would own more than one property, other than your own home
  • You would own your business premises in your SMSF and effectively pay your business lease to yourself.

 

Create Your Lifestyle

Never get so busy making a living that you forget to make a life. Work a few days a week, take regular family holidays and give to worthy causes, all while knowing your cash machine is building a beautiful future.

  • Outside of work and family, you would have hobbies that you regularly participate in?
  • You would hardly ever work weekends or nights.
  • You would be living in your dream home.
  • You would regularly eat out at nice restaurants and often go on date nights.
  • You would be fully present when you are at home with the family.
  • You would take 8 - 12 weeks holiday each year.
  • You would get 8 hours per night sleep.

 

As a result of not knowing your numbers, most business owners -

  • Give half their profits to the tax man, unnecessarily.
  • Have revenue but wonder where the profit went.
  • Come up short when bills are due.

So whether you are financially “drowning” or only just keeping your “head above water”, your primary job as a business owner is to get Cashed Up.  That means pulling more money, time and happiness from your business.

Everyone reading this has an opportunity to start again with a new sheet of paper and a new plan. You just need the desire to change and the courage to action.

So, if your business was Cashed Up here’s what would be doing:

That’s what you would be doing if you had a Cashed Up business. If you really want to Save Tax, Boost Profits & Accelerate Cashflow it might be time to change accountants.

P.S. If you are thinking of changing accountants, first have a listen to the DENT Podcast that tells the story about how disrupting the accounting industry saw Ben Walker (founder of Inspire CA) become an award winning entrepreneur.