Why I love Profit First Accounting
If you’ve been following along for a while, you’ve probably heard me talk about how much I love Profit First Accounting. I know “accounting” can be a scary word for a lot of business owners (budgets, taxes and payroll, blehhhh!).
I’ve had my own share of horror stories:
“In summary,” my former accountant said in a cheery voice, “you owe $16,342 in Federal taxes, and then don’t forget that you also owe $3,247 to the State as well as $7,000 for your quarterly estimated taxes for Q2….”
In truth, I don’t entirely remember what the exact numbers were. All I remember is that:
- It was way more than I had
- I cried
- My accountant told me this was actually a GOOD thing because it meant my business was making money but it did NOT FEEL LIKE THAT AT ALL
I had never even gotten a tax bill before, and now my accountant was telling me I had to pay more in taxes than I had paid myself in the past six months combined.
This was several years ago, and luckily afterwards I dusted myself off, I found the book Profit First, a new accountant (my hero!), and never looked back. These days, I don’t even break a sweat thinking about tax season!
So what is so magical about this accounting system?
Unlike traditional accounting methods, Profit First accounting literally gets you to focus on your profit, first and foremost. With Profit First accounting, you are regularly setting money aside in separate accounts for taxes, owners pay, etc. This ensures you’ve saved enough money throughout the year (out of sight, out of mind!) to:
- be able to pay end-of-year taxes without having a heart attack
- pay yourself regularly (what?! Who’s ever heard of a “salary” for an entrepreneur?)
This accounting method is also incredibly helpful for budgeting– not only in the moment but in the future, too!
“But how does it really work and why should I get started,” you may be wondering? I thought you’d never ask! In this video, I take a deeper dive into why I think Profit First is so advantageous for entrepreneurs, and I share more about what I’ve learned over the past few years using Profit First.
After watching, if you’re still thinking “tell me more about secret accounts full of tax money!!” I highly recommend the book Profit First for E-Commerce by Cyndi Thomason as a starting point. The book follows all of the “rules” of Profit First accounting, but the author addresses so many of the things that are unique to product-based–like a crazy holiday season and the extra costs associated with having to keep inventory on hand!
By the way, none of this is sponsored, I just really love Profit First accounting and believe it can really be life-changing for entrepreneurs. It was for me!
Cheering you on,
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