What is Profit…?
What is profit…?
Hey google/alexa/siri.... what is profit? What comes up when you search "what is profit?" On this blog we explore some of the most searched terms around profit, the Profit First method and the basics of financial accounting.
So what is profit anyway?
Take me back to Economics 101!
PROFIT is... a financial or monetary gain.
The difference between amount earned (revenue) and amount spent (costs & expenses). Since profit is often misunderstood, we explore more about what it means to be a profitable business on our blog series!
What is Profit & Loss?
It is a financial report, also known as an Income Statement, that summarizes a business' sources of income (revenue), costs of goods sold, operating expenses, gross and net profit.
This report is the basis for the financial status of a business and is a starting point for finding tax liability. While comprehensive, this report can be customized to different time periods. However, it does not include key information about full expenditures of a business -- such as debt, liabilities, assets and equity. You'll find that information over on the Balance Sheet.
Our Extraordinary Bookkeepers are well versed in perfecting these reports to be accurate! This report, which comes in the monthly management packet, can be used to make strategic decisions in the business. Whether you are thinking of adding a new product or service line, hire more team members or purchase a large piece of equipment — you better reference these reports on a regular basis! In addition to the monthly view, this report can be viewed in the period of calendar quarters or years. It is often used year-to-date or to “previous year” to compare periods. If you are buying or selling an entire business, this is often the first place you will look for the financials.
What is Profit First?
Profit First is a cash flow management system designed to help businesses become more financially healthy and profitable. The Profit First system was created by Mike Michalowicz, a business author and entrepreneur, and it is based on the idea of prioritizing profit in a business's financial management.
The main concept behind Profit First is to allocate a portion of every dollar of revenue that comes into the business to specific accounts with different purposes. The 5 foundational bank accounts in the Profit First system are:
Income Account: This is where all revenue is deposited.
Profit Account: A percentage of the revenue is transferred to this account, ensuring that profit is prioritized from the beginning.
Owner's Compensation Account: The business owner pays themselves a predetermined percentage from this account.
Tax Account: A percentage of revenue is allocated to cover tax obligations.
Operating Expenses (OPEX) Account: The remaining funds are used for the business's day-to-day operating expenses.
Sound too complicated? That is why Profit First Professionals exists! To certify bookkeepers, CPAs and coaches in this method to help you implement it the right way.
At Beyond Your Books, you get just that! A team of full-service bookkeepers and certified coaches to guide you along the way to a more profitable business.
What is Profit First Bookkeeping?
Profit First Bookkeeping combines our full-service bookkeeping firm with the proven Profit First method. Our certified professional coaches work with our team of remote bookkeepers to guide business owners in assessment, implementation and workflow success of the Profit First method.
How do you know if you are ready for Profit First Bookkeeping? All new clients have a complementary Profit First Instant Assessment, which allows us to look at the revenue bracket and the basics of current cash flow – expenses, owner’s compensation, taxes and of course - profitability. Our team identifies the best time to implement Profit First, and connects business owner with one of our coaches. Working with a coach brings together the owner’s vision for the future - their goals, growth trajectory, current cash needs, and couples that with the assessment of historical financial information. Then, we help business owners every step of the way with implementation – setting up the appropriate bank accounts, allocating funds to each account based on the Profit First percentages, and ensuring that the system is consistently followed. The bookkeeper also provides ongoing support and monitoring to help the business stay on track and achieve its financial goals.
The Profit First methodology aims to promote financial discipline, ensure that profit is prioritized, and help businesses become more financially stable and profitable. A Profit First Bookkeeper can be a valuable partner for business owners seeking to improve their financial management and increase their profitability.
What is profitable in business?
Great question! At Beyond Your Books, we believe that any business can be profitable. We are passionate about helping business owners simplify the management of their finances – so that they can get back to the business of their dreams!
We work with a variety of industries and professionals across the US – and we try not to play favorites. We have a team of remote bookkeepers (in every time zone!) that have vast experience in helping business owners of all types with their bookkeeping needs.
Here are just a few examples…
Tech service companies
Professional artists
Heart-centered professionals such as licensed therapists and social workers
Healthcare providers
Legal services providers
Health & fitness gym owners
Online business owners
Real estate companies
ANY of these businesses can be profitable – and thankfully, MANY are! Thanks to the Profit First system, we can help entrepreneurs in any field understand their finances in a way that prioritizes the sustainability that comes with year over year profitability.
What is Profit First Certified mean?
It means we are official! Being Profit First Certified means our firm is a member of Profit First Professionals, a network of global membership of 500+ members in 25 countries. Our Certified Profit First Professionals are trained and tested in Client Advisory Services by the man who wrote “the book” – Mike Michalowicz.
Being certified means we didn’t *just* read the book and thought it was a good idea too. It means we have been vetted, proven to have implemented the method in our own businesses (successfully), and submit beta client cases of our competency. We choose to continue membership because of the value it brings! Year over year, the method is growing in popularity – and so many more case studies of the thousands of businesses this method has helped fuel our passion for helping entrepreneurs succeed.