60. What is Profit? | How do I know if I am profitable?
November 1, 2019
Hey, are you wondering how well you’re doing with your bookkeeping and knowing your numbers? Maybe you’re at a total loss of where to begin. Maybe you’re not sure how well you’re actually doing. You just need to know the next steps to take.
During a bookkeeping strength assessment, I work with business owners one on one for about 30 minutes and identify what their next step needs to be. I’ll lead the conversation by asking some open-ended questions and then ask ten laser focused questions so I can pinpoint exactly what you should do next and how strong you are with your bookkeeping and knowing your numbers. Business owners find this to be the boost of confidence they need to tackle their bookkeeping head on.
To get on my calendar for a free session, you can email me at firstname.lastname@example.org or message me on Instagram @lydia.miller.mba. Now on with the show.
Welcome back to the podcast!
This is the start of a new 5 part series all about profit.
We all know that we want and need to be profitable in our business. After all, if we aren’t profitable then there’s now way that we can continue on in business. Even if the IRS looks at us as a ‘non-profit’, we still have to be bringing in more than we are spending.
On today’s episode we’re going to answer two questions. What is profit? How do I know if I am profitable?
What is profit? According to the accounting formula, profit is revenue minus expenses. The money that you’re bringing in minus the money you’re spending. The difference of that is your profit.
You can look at your profit several different ways. You can look at it in a time frame, so for the previous month or quarter or year, or you can look at your profit according to each item you’re selling. So if you have an online program, you can look at how much revenue the program brings in minus the expenses of the program and get a picture of just how profitable that particular program is.
How do I know if I am profitable? Well, you look at the numbers. First, you want to run your numbers after you’ve reconciled your bank statement in your accounting system to make sure all of the information is included, and nothing is duplicated. Then you want to make sure that all of your income and expense are categorized correctly. Then you want to run your numbers to find out if you’re profitable.
Once you’ve done all of that, and you run your profit and loss, you’ll see the number at the bottom of the report. If it’s positive, you’re profitable. If it’s negative you are not profitable.
Now, unless you’re really intentional about setting all of that cash aside, you may not feel profitable. This is a concern that so many business owners have. They see that at the bottom of their profit and loss that they’ve made a profit, but where is that cash? Well, not everything you do in your business ends up on your profit and loss. If you pay yourself it’s not taken out, if you pay taxes, it’s not taken out, if you pay off debt, it’s not taken out and if you buy an asset for your business, it’s not taken out.
All of those things cut into the money you bring in as profit, and they aren’t bad things to be spending money on.
On paper, you’ll know if your profitable if you run your profit and loss and see a positive number at the bottom of the page.
Remember, revenue minus expenses equals profit, according to accounting.
Profitability is vital to your business. In the next few weeks on the podcast, I’ll have episodes around how you can become more profitable, how you can budget for profitability, what do you do with profit, what kills your profit and a book review on profit first.
Are you struggling with finding your profit? Are you trying to figure out how to run those reports correctly and trust that the information is correct?
I’d be honored to work with you. To get started, email me at email@example.com with the problem you’re having and we can discuss the best way to get to a solution in a bookkeeping strength assessment call.
If you are ready to use your numbers to help your business, please subscribe so you will be notified when the next episode drops.
I would love to connect with you. You can find me on Instagram @lydia.miller.mba and always by email firstname.lastname@example.org.
So until next time, go, make it happen.