Jacksonville CPA | Helping Entrepreneurs

Okay, so this is the, the last segment of today’s podcast, so you have the Jacksonville CPA that you’re not happy with, then give them a call and we’ll, uh, we’ll be proactive and will help you get where you need to be as it relates to your finances in your accounting. So, you know, got marriage problems, were not the best people to call. So you’re fine. I’ve worked with a lot of business owners, my career. So many business owners don’t understand where their profits go. I say, Hey, you made, um, made a hundred grand. And I’m like, uh, I don’t see that in the bank. Um, so, you know, I can’t tell you where every dollar went, but the cash has gone because you’ve spent it. You’ve either bought some equipment or you’ve bought some equipment and sold it. You bought some equipment and it kept it, you know, accounting is a closed system on what that means is for every debit there is a credit, you know, for every dollar that goes into the bank, the, there has to be an, uh, an equal entry to a sales or maybe a, a, an investor loan or something.

And for every dollar that goes out of the bank, there’s going to be, now there’s an expense or profit distribution account that is going to be debited or credited. So, you know, it’s, it’s not that hard to figure out, it’s just we need to go in and figure out where this cash is going, where your profit is going. So if you don’t have a Jacksonville CPA that’s helping him with this, then give him a call. And so when some of the spending is this happening, you know, entrepreneurs don’t really think about what they’re doing with their money. So let’s talk today about the four pillars of cashflow. You have to understand these, you have to understand these forces and to prevent bad things happening with your cash. Okay? So, so,

so the four pillars of cashflow, number one is paying your taxes and you know, you’ll find most of them, Jacksonville, CPA firms are, they’ll help you pay your taxes to understand how much tax you need to pay. They may not tell you on time, but, uh, you know, they’re eventually going to tell you, um, the next is repaying debt. So you know, your business, if you, if the economy goes into a financial crisis as we did in 2008 businesses that survive are the ones that don’t have debt. Okay? The next is reaching your capital targets. So a capital target, every business should have at a minimum capital target of two months worth of operating expenses in the bank. And then the last is now taking profit distributions out. So you have, you have your market base wage, that’s, you’re taken out for personal expenses and you know, hey, you’re in business to make money, so you’re going to take profit distributions out as well. So I’m sure your Jacksonville CPA has not gone over these four pillars of cash, but it’s something that you need to be aware of. So good example of what happens, start the year out. You have 100 grand in cash. That’s not an insignificant amount. You know, if we’re dealing with a business that’s a million dollars gross, a million dollars gross revenue.

So let’s assume that you had a profit of 125,000, that’s a good profit number. It’s 12 and a half percent. So how is it that you only have $25,000 of cash at the end of the year after paying $50,000 in taxes? Okay, so 125, 50,000, 125 times 40 percent. Then you’re like, oh yeah, I did buy a $50,000 truck for the business and I bought it right at the year end to save money in taxes. And then you have a whole series of, Oh yeah, moments as you realize you made another down payment on a, uh, a new vacation home and you made $50,000 in and principal payments on debt that she had outstanding. Then you understand how you went from 100,000 in cash to $25,000 because he either spent the money were you repaid, which borrowed. So if you have a Jacksonville CPA firm that’s not helping you with these things, you need to give them a call.

So the approach that we would recommend here at my neighbor is to start with the 100 grand cash and add your pretax profit of 125 for the year. So your total cash available, b, 2:25. And number one, always pay your taxes. That’s forced number one. It should be payment number one. So $50,000. Then you need to repay the loan. We talked about you paid $50,000 in principal payments on the loan. You need to repay that loan. This leaves you with 125,000 before you figure your, your minimum capital targets or some people refer to it as working capital. But you know, we, we like to call it a capital target, um, because I found so many businesses that need to have a target and be shooting for this number. So if you, your Jacksonville CPA is not proactive and talking about capital targets and salary caps, you need to give Mineva a call. So, and then I went over before, you’re, your minimum capital targets should be two months of operating expenses in cash and nothing on a line of credit. So you know, and in this example, the capital target is $100,000, so $50,000 operating expenses per month.

So now we started out with 2:25, we pay taxes 50, we pay down debt of 50, we had, we funded our capital target of 100,000 and so then we have $25,000 left. So that’s what’s available for distributions, which is the fourth pillar of cash. So you know what that means, right? You know you shouldn’t have that, that a $50,000 suv or putting $50,000 down on a condo or a vacation home. So you should make sure that your, your cash pillars are in the right order and that you’re being proactive with this. So if you’re looking for a Jacksonville CPA that’s proactive, then you need to give Mineva a call so you know, if you look at the numbers and know what they mean is going to give you the courage to make the right choice and having the data allows you to quantify it so you’re not going past certain lines. And if you do decide to go past it, then you know you’re making a really bad choice and you’re stepping into very, very, very scary territory. So that’s the pillars of cash and subsequent episodes we’ll talk more about it, but I think that’s gonna be, that’s gonna wrap up today. So, you know, thanks for listening. And, um, again, if your Jacksonville CPA is not proactive, you need to come to Mineva so we can help you with your financials. Thanks.