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Business expenses are a very important aspect of your business. Your ability to be profitable and, even more importantly, pay yourself what you deserve for all your time, effort, and energy, is impacted by the decisions you make in this area.
How you view and choose business expenses can be heavily influenced by your mindset and beliefs around money. Unfortunately, many of us don’t even realize we have a mindset or beliefs around money… or the impact that can have on the financial decisions we make.
To have a successful business, you want to strengthen your financial position. Every expense should be part of your bigger business strategy designed to help you thrive and reach that goal. Taking an honest look at your business expenses, and your mindset around expenses is a great place to start to get your business moving in a healthier direction.
Strengthening Your Business Finances: Exploring Your Mindset Around Business Expenses
What is your mindset about expenses? You have one, whether you realize it or not. To help you get some clarity on this, ask yourself the following questions.
- Do you see expenses as a way to reduce your tax liability and often take on expenses just for that purpose?
- Do you glance at your account when considering a new expense and spend freely when the account is flush, then panic and rein it all back in when money gets tight?
- Do you prioritize expenses over your owner’s pay?
Your answers to those questions will give you valuable insight into your mindset around expenses. They will also shine some light on why expenses might be negatively impacting your business.
Let’s look at the first question. If you see expenses as a great way to reduce your tax liability and are racking up expenses for that purpose, you are taking money out of your own pocket. Let me say that again. Every expense takes money out of your pocket.
When you look at it that way, it’s pretty clear that every expense should benefit your business and bring in more than it is costing you. Every expense should have that purpose.
The shift here is that every business expense should be an investment in your business.
That simple shift in mindset will change your business finances for the better while increasing cash flow, owner’s pay, and profits in the process. So, consider your business expenses carefully and make intentional, informed decisions. You will still have tax write-offs, but each one will be helping you grow your business, as opposed to draining it.
Now for that second question. If you glance at your account when considering a new expense and spend freely when the account is flush, then panic and rein it all back in when money gets tight, that method of money management is most likely creating chaos for your business finances. Nobody wants financial chaos!
So many business owners get caught in the trap of spending freely when the account seems full. It’s not that they don’t care. Often, it’s more a case of not knowing how to do it differently. Again, it comes down to a mindset and behavioral shift.
It’s so important to have more than a glance-based idea of where you stand every month. That’s your hard-earned money and what you choose to do with it affects the health of your business.
You don’t need to be an accountant, but you do need to know what’s coming in, as well as what needs to go out and when to have a solid picture of your finances that will put you in control of your financial future.
For the final question, if you see your owner’s pay as last on the list and pay everyone and everything before you pay yourself – or don’t pay yourself at all – it’s definitely time to shift that mindset and behavior!
How can anyone survive and thrive without a steady income? You may be able to continue like that for a while, but it’s only a matter of time before you get discouraged or (worse) lose everything.
It’s time to put your owner’s pay at the top of the list. It really can be done. It’s just another shift in mindset, as well as implementing a simple system that prioritizes your pay.
As mentioned in A Profitable Business Is Within Your Reach, the old formula needs to be flipped from…
Revenue – Expenses = Profit (and owner’s pay)
to…
Revenue – Profits – Owner’s Pay – Taxes = Expenses
While that might be hard to grasp, it really is a game-changer! Done with intention, purpose, and a plan, your business will have only the expenses that are directly contributing to your success. More importantly, your profit account will grow with every deposit and you’ll be getting paid – regularly.
You will take priority over business expenses. No more out-of-control spending with this method.
This is all so simple and makes so much sense! With just these simple shifts in mindset and behaviors around business expenses, you can easily see the benefits you would reap. Your business will be stronger and healthier, and you’ll be paying yourself what you deserve for all your time, energy, and effort. That’s how it should be.