In business, no matter what field you’re in, the underlying goal is to make a profit. You put so much into your business and eventually, getting something back, and being able to cover your expenses is rewarding. But finally making a profit may not be as easily defined as you think. Harry Scheyer, CPA/PFS, CFP, CExP, principal member of Pinnacle Wealth to Life, offers a few tips about what business owners need to know when their business finally makes it into the black.
1. Make sure you understand your cash flow situation. Being in the black is great, but owners should know that showing profits does not equate to positive cash flow, even if you are on cash basis.
2. Consider your expenses. If you used all your revenue to pay off debt or other obligations declared on your financials, then being in the black could be very bad. You may end up paying taxes on the declared income and not have the cash to pay it with.
3. Know that there are options. What you do when your business makes it into the black really depends on your business situation.
4. Always have a financial game plan. To improve your business decision-making you should have a working economic model of your business. That way when it comes to making decisions like unexpected taxes or not having enough funding to support your growth, then a working economic model will help you prepare and avoid the inevitable major pot-holes and make the ride smoother along your journey.
5. Reach out for help when it comes to taking your next steps. Talk to your CPA or accountant about [your situation].
Published (and copyrighted) in South Jersey Biz, Volume 5, Issue 6 (June, 2015).
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