It took me 20 years in business to figure out how to forecast profits each quarter.

In 2019, we started using Profit First to manage our cash flow. This transformed our business, allowing us to focus on the important things—customer service, supporting our team, and being present with our families and lives—instead of just worrying about paying the bills.

By 2022, we signed up for new software developed by one of Australia’s Profit First professionals, Craig Minter. This software has changed the way we run the business, make decisions, and has given us confidence that our 20+ year-old business will thrive for years to come.

Even though the business was well-established, every February, when work started to dry up, we feared we wouldn’t make it to the next peak season. We’d reduce everyone’s hours, stop seeking new work, and limp through until July when things got busy again. It was a short-term approach. By July, we’d hit the peak season, work ourselves to exhaustion, and by October, be left tired but with a decent amount of cash in the bank. We’d then take that money out as our reward for the extra hours and stress.

Looking back, I don’t know how we managed. Actually, I do—there were several times I had to top up the business with my personal savings, just to cover wages or pay tax bills. It wasn’t sustainable, predictable, or enjoyable. We’d spend months chasing clients for payments just so we could cover wages. When the BAS was due, we’d arrange payment plans with the ATO and pay it off slowly.

Fast forward five years, we’ve paid off a $100,000 overdraft we relied on annually. We now have buffers in every account—over two months’ worth of payroll and enough tax set aside to get through the BAS periods without needing a payment plan ever again.

So, what did we do?

1. Implemented Profit First and stuck to it: Whenever we spotted cash flow issues, we’d open another bank account and set money aside. Initially, we struggled with paying bills and wages from the same account. Bills were prioritised, leaving not enough for wages, so we separated the accounts and allocated funds for each expense category.
2. Reduced costs: We relocated from a large office to a smaller one. We also paid for archival storage, so we cleared out our storeroom and shredded old documents. The move helped reduce our electricity and phone bills too.
3. Offered upfront pricing: Changing how we structured our fees provided clients with more clarity on what they were paying for, and gave us money upfront to cover wages. If clients couldn’t pay upfront, we offered monthly payments, which helped their cash flow and ours.
4. Continuously reviewed costs: This isn’t a one-off task. What’s costing time and money? What’s frustrating? Is there software to boost productivity or improve services? Every month, we review 2-3 costs and make changes, whether reducing software licences when staff leave or finding better deals on services.
5. Implemented “The Profit First Prophet” forecasting software: This software made it easy to review costs, anticipate expenses, and accurately predict account balances. For the first time, I know we can pay our insurance in February upfront because the forecast shows we can afford it. I also have a close estimate of how much profit we’ll earn each quarter, thanks to tracking our average weekly income and upcoming expenses.

Now, I make decisions with a long-term focus. I’m less stressed during the quieter months of January to March because we have reserves to cover wages. This allows us to focus on bringing in more work, generating more income, and increasing profitability.

We review our percentages every six weeks, but now we only make small adjustments—1-2% per quarter—because we’ve found the right balance for our business. By logging in weekly to update our bank balances, we can accurately predict what’s happening with our business—from income to profitability and bank account balances. Most importantly, we know how much the business can contribute to our personal goals.

If you’d like a complimentary chat about how Profit First can work for your business, book with me now:
https://app.acuityscheduling.com/schedule.php?owner=18230665&appointmentType=26579492

By Jodi Porteous, CPA & Profit First Professional Mastery Member