Profit First: How To Make Paying Business Taxes a Breeze
What if I told you implementing the revolutionary Profit First method in your small business could eliminate the headache of paying business taxes?
This statement may make you feel uncomfortable. Profit first? Paying yourself before paying for budgeted expenses like rent, payroll, and utilities seems like a backward concept. But, implementing Profit First will make paying business taxes a breeze this tax season.
Imagine knowing exactly how much you can allocate to each of your business expenses. You pay yourself first and set aside adequate money for taxes, then you can spend on your other small business expenses.
You’ll learn how to implement Profit First in your own business in today’s post. If this sounds interesting to you, keep reading to learn how Profit First can help ease the headache of filing business taxes.
What Is the Profit First Method?
In order to understand how Profit First can help your small business this tax season, you need to understand what the cash flow management system is created to do.
If you guessed Profit First means prioritizing paying yourself first, then you’re right on the nose! Profit First is a cash flow management system created by Mike Michalowicz. This system is explained in great detail in Mike’s book Profit First.
I encourage you to read Mike’s book for yourself, but let’s dive into the high-level details of Profit First and how it can apply to your small business this tax season.
Essentially, the Profit First system instructs you to take a small percentage of each sale and allocate it towards profit. The money left over is then used to pay for your business expenses like rent, utilities, equipment, and even payroll.
As a bookkeeper for over 30 years, I believe this method can be transformative for small businesses. By flipping the script on traditional accounting, you’re ensuring your business is accounting for taxes, profits, and pay as a top priority.
Allocating expenses in your budget – and sticking to that budget – is so much easier for your business with the Profit First system.
How Can the Profit First Method Help Me With My Small Business Taxes?
If you consider the idea of implementing Profit First in your small business, you’ll quickly see that the method helps streamline the accounting process for your small business for tax season.
With an allocated expense budget determined ahead of spending, you know precisely the amount of money you can distribute to each of your expense categories.
Traditional business accounting emphasizes using sales to pay off expenses, with leftover money reserved for profit.
The Profit First accounting method encourages you to be profitable by using sales to pay yourself first. This system completely changes the way you pay for expenses, setting up inherent guardrails that keep you within your expense budget.
Implementing the Profit First method in your small business accounting also means cleaning up your books for tax season is a much easier process.
Read our helpful post on cleaning up your books for tax season for even more information on how to make tax season easier this year.
How Can My Small Businesses Get Started With Profit First?
Getting started with the Profit First method for your small business is as easy as setting up a free consultation with us.
In our meeting, we’ll discuss your unique small business needs and how we can start implementing Profit First today.
Although this information is well detailed in Mike Michalowicz’s book, it is important to reach out to a professional bookkeeper who can help you with other important aspects of your small business financials, including:
- Accurately categorizing your expenses
- Confirming the accuracy of financial data
- Ensuring the percentage of sales that goes to profit vs. expenses is perfectly balanced
- Reconciling your accounts to ensure any manual calculations are correct
Profit First will transform your small business and Cindy’s Mobile Bookkeeping is here to help you every step of that transformation.
Contact us today to book a free consultation and get more information on how this cash flow management system can help you prepare your small business taxes.