Continuous Financial Improvement

Is there one day on your business calendar that puts your business in the black? All bills paid. All loans paid. All taxes paid. All bonuses paid. And you’re ready to go on an all expenses paid vacation with the family.

That’s where the name “Black Friday” came from. For a retail business operating in the red all year, the Friday after Thanksgiving could put it in the black.

But it doesn’t have to be the Friday after Thanksgiving. A flower shop’s Black Friday could be Mother’s Day. A chocolate store, Valentine’s Day. If you cater weddings, summer could be your time.

Each of these businesses requires a different planning technique to make the money last all year. Because even if the money comes in all at once, the bills need to be paid monthly, all year long.

If your Black Friday comes early in the calendar year, you will need self control not to spend your windfall. You’ll have to save it for the rest of the year.

If your Black Friday occurs late in the calendar year, you have to save last year’s profits to pay this year’s bills, or you’ll have a year of worry and fret ahead of you.

It’s all about how to manage cash flow, the thorn in the side of every business.

One way of managing cash is from the standpoint of tax-avoidance. If someone asks you if you want to pay less taxes, and you say, “Yes,” then they will say, “Take any profit out of the business in pay, distribution or bonuses.” True, you will have less net income to pay taxes on. But realize that this is also draining your cash.

And when February rolls around, and you can’t pay your rent, you can’t undo the December bonus you gave yourself.

The solution, of course, is to budget and put money in a savings account so it’s there when you need it.

You are in charge. If you want to be debt free and have money in the checking account, do it. You’ll have more freedom to make decisions for the long-term growth of your business.

—Gerry