Spend Your Money After You Have Earned It

Finances should be really simple: you earn money, and spend less than that.

That is how you deal with your personal finances (mostly).

So how about businesses?

Most companies deal with business finances rather differently. They buy "on credit". They order goods in, the supplier sends a bill, and then the business works hard to earn money to pay it.

That means the business is always trying to catch up. Always "living" in the past, and not in the future, where you really want to be.

So what can you do?

Control the money before you order

Control the money flows, and the bills, BEFORE you order the goods. Once you have ordered and received the goods and the bills, it is too late to apply economy. The bills are there and have to be paid.

Firstly, for purchasing, I get three quotes for the items I need, and pick the best and most economical one.

For goods you need regularly, I would check other suppliers about once a year, to make sure you are still getting the best deal. By best deal, I mean not just the price, but also the quality.

Spend after the income is in

Secondly, work towards spending the money AFTER you have got your income.

By spending, I mean the ordering of goods, not the payment of the bills. Because by ordering the goods, you are in effect spending your money.

The ideal way is to pick an appointed time once a week. Count up all the money you received that week (and have not yet spent), and make a plan for how to spend it.

Here is an example. This week you have £1,000 in the bank that has not yet been spent.

• Put a percentage into a separate bank account for the taxes, say £200.
• That leaves £800 to spend.
• Always take off the regular bills first: rent, utilities, insurances and so on, which you do not have a choice on. Just like at home. Put that money aside until the bill is due.
• The rest is open for discussion as to how it gets spent.

One more thing: you only count actual money in the bank. Not invoices still to be paid by your customers!

Work out your numbers first

For this Financial Plan to work, you of course have to know your regular expenses, so work that out first.

Work out exactly what your average income is, and what your usual expenditure is. What figure are you left with at the bottom?

If it is a plus figure, you are doing well. If it is a minus figure, you have some work cut out.

The next step is then twofold. One, cut your expenses so you do not keep spending more than you make. Two, work out how you can increase your income.

Do this about every quarter, to see where you stand, because the picture changes all the time.

The way to be profitable is not just to earn a lot of money. You also want to be in control of your finances, so that you do not end up spending that lot of money, and more.

The above is how you gain control. Give it a try! Contact me if you need any help, or have questions.

As always, keep it simple and... Flourish and Prosper

Lisa