The risks of buying property at auction

Where did the profit go?

As we enter financial year end, Action Coach Phil Nassau asks: have you had the following conversation with your accountant?

Your accountant is taking you through the results of your previous year and you want to discover what the profit was and how much tax you’ll owe. Your accountant shows you’ve had a good year. Sales are up, costs are under control and you made a profit. You ask: ‘So where is the money, as I would like to take a nice dividend this year’.

Sales - Expenses = Profit

This is the way many business owners structure their business. This is logical but humans are not. We work on selling more to cover costs and pay bills as we go. This structure teaches us to focus on sales and expenses first, then on our bank balance. In conventional accounting for your business, we focus on Sales and Expenses. Profit comes as an afterthought.

Sales - Profit = Expenses

You could instead use this structure. When profit follows sales, then expenses are paid, and profit is put away. If out of sight, out of mind.

You can work this by having six business accounts: ◆ Main Income Business Account (1) and Owners’ Compensation Account (2). These should already be in place ◆ Profit Hold Account (3), Tax Hold Account (4), and Operations Expenses (5). This last account is for business development.

Sometimes a PA just isn’t enough

Next, work out what your profit, tax and operations expenses were as a percentage of your revenue from the previous year. Then, at the end of each week, transfer that percentage for each area to each account based on revenue received. I use this myself and now take a dividend each year vastly more than ever before. If you did not make a profit in the previous year, start at one per cent.

The downside is it takes around 10 minutes a week and you could find you struggle to pay some bills initially. The upside is you’ll start to reap the profit and you’ll be all over the numbers. Plus, the business becomes more profitable.

Oh, and that sixth account should be your VAT Savings Account (6).

JSP Virtual offer a concierge service to suit clients who understand their time is best spent working on the business rather than booking travel, personal reservations and appointments or food shopping.

What is the value of being given time back?

Book a free confidential consultation today by calling 07854 084 861 or email info@jspvirtual.co.uk

International Women’s Day

This year’s theme is #BreakTheBias encouraging all to imagine a gender

equal world WORDS BY EMILY MILLER, KERRY SMITH AND TOM YOUNG