If you heard the last episode of the podcast, you would know I am not a fan of the profit-first system.
I think Mike and his books are awesome, but the profit-first system has some significant flaws for me.
Case in point.
If the profit-first system was the best financial management system, wouldn’t all the companies listed on the stock exchange use it?
Turns out not one listed company uses it…
So why don’t I like the profit-first system?
1) It promotes business owners being lazy when it comes to financial management.
Why learn to cook when I can just buy takeout every night?
Financial management is just too important not to learn it properly in my opinion.
2) The traditional accounting system is amazing.
Yes, I accept getting a good grasp of finances comes with a steep learning curve and takes some time to learn.
But… Once you know it…
It will change the way you do and think about business.
(In a good way.)
Let’s continue with this cooking analogy.
Once you know how to cook, it opens up a world of possibilities for what you can eat.
You are no longer limited to what’s available but can cook what your business needs!
Do you want to be a chef? Or someone who orders takeout when it comes to your business?
It also gives you the unique ability to analyse other businesses and know how they work.
3) Every business and its goals are unique.
At different stages of the journey, you will need to change the goals of your financial management system.
Believe it or not, at a point in my life, the goal of my business was profit LAST.
(Yep, you read that right.)
Because we wanted to spend every cent we could on growing the company.
Taking profit too early would have prevented us from getting the team we needed.
Then, at another point in the journey, my goal was “Cash first” (not profit first).
I had a profitable business.
But… my cash cycle was negative.
I needed to focus on improving my cash first to stay in business.
The profit-first system doesn’t adapt well to changing conditions and goals.
Good financial management allowed me to focus on cash first.
I just released another podcast episode on what good financial management looks like.
If you would like to hear about my financial management process, be sure to tune in.
All information we share is NOT financial or investment advice and is purely intended for entertainment and educational purposes only. Always seek professional advice before acting on any financial decision.
00:00 Welcome to Business and Investing
01:23 The first step to good financial management
06:11 Commmmunicating goals with your bookkeeper and accountant
09:02 Reading and analysing financial reports
15:54 How to get good insights on your finances
19:56 Good financial planning needs constant learning and improvement
22:05 How managing finances vary in property investing
24:34 Wise words to live by for business owners
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