Are you aware of the many benefits hiring an accountant can have for your company?
To give your business the foundations it needs to grow, you need to invest in something. Working with an accountant can be the first step in that process, but the second should be adopting profit first accounting.
Harnessing solutions like profit first accounting can change the way your company operates for the better. We’ve written this article to explain exactly what the Profit First approach is.
We’ve then outlined the many benefits hiring a profit first accountant can have for your company right now.
What Is Profit First?
The Profit First system was first created by Mike Michalowicz, who is also behind other popular business books like The Pumpkin Plan.
But the book that started the profit first concept was aptly named Profit First.
Since Profit First was published, over 175,000 businesses worldwide have successfully adopted the approach to expand their business. So what exactly is the idea behind profit first?
The premise of profit first accounting is that businesses should aim to make a profit from their very first sale. From there, businesses can reinvest their profits to further expand their business practice.
The profit-first accounting method has been designed to support this approach.
It’s important to understand the method, now you know the background behind the actual term.
What Is Profit First Accounting?
Profit First accounting is a simple profit maximization strategy. As above, it’s based on the concepts outlined in Profit First.
Profit First is an accounting strategy that tells you exactly how much profit your company is making.
This is achieved by always subtracting your expected profit margin from any given sale. This is sort of like treating your profits as you would your costs or overheads.
It’s a simple concept, but one that can have a profound effect on the way you do business. By understanding your profit margins, you can make informed decisions about where to invest your money.
With that in mind, what can the profit first accounting method help you achieve?
What Can Businesses Achieve by Using the Profit First Accounting Method?
You can also use profit first accounting to set target profit margins for your company. This will help you to ensure that your business is always making enough profit to sustain itself.
It can also be used to help you make decisions about where to invest your money.
For example, if you’re considering expanding your business, profit first accounting can help you decide whether or not it’s a good idea.
If you’re not making enough profit as it is, then it’s probably not the right time to invest. This can then be a way of using profit first marketing to plan growth strategies for your business.
Profit first can thereby become a smart planning tool for your company. In business, planning ahead can be the key difference between sustained success and unexpected failure.
But it’s only by working with experience profit first professionals that you can achieve this.
Now that you know what profit first is, how the accounting system works and what it can achieve, it’s important to explain what benefits Profit First can provide your business today.
Profit First Can Help Guarantee You a Certain Margin
Profit first accounting can help you to create a budget for your company, based on your expected profit margins. This will ensure that you’re always aware of how much profit you need to make in order to meet your financial obligations.
It’s then far easier to design your business in a way that can ensure you obtain a certain profit margin in any given period. After all, you’re already treating it like a cost.
It can also help you to plan for unexpected expenses, such as a drop in sales or an increase in costs. This is thanks to the fact that you’ve already taken your profit out of your figures.
If you continue to operate your business successfully, this can be a way of guaranteeing that your profit is kept safe, just like you would with any of your assets.
Profit First Promotes a Purposeful Attitude Towards Business Management
When you’re using profit first accounting, you’re constantly aware of your profit margins. This can help to change the way you think about your business for the better.
Instead of just trying to make as much money as possible, you’ll be focused on ensuring that your business is profitable. Because as any good accountant knows, making more money doesn’t always mean making more profit.
This can help to promote a more purposeful attitude towards business management, which can lead to better decision-making as you’ll be more driven.
You’ll be driven to achieve a certain amount of profit each month, as it’s been factored into your accounting strategy.
It can also help to improve your company’s cash flow, as you’ll be more likely to invest profitably. If done intelligently, this can grant you access to better growth opportunities as mentioned above.
This purposeful attitude can then springboard you towards a more successful business in the future. All of this is thanks to a change in mindset, and that mindset change is achieved through adopting and implementing a profit first accounting strategy.
Where Can I Find Out More About Profit First Accounting?
You should now know what exactly profit first accounting is, and what constitutes a profit first strategy. Our team here at Bennett Financials is experienced in several different accounting approaches, including using profit first to help a business expand and grow.
If you’d like to learn more about the strategy please contact us directly. No matter what help you need with your accounts, our team will be able to assist.