Where the F is my money going?

* Transcript created by AI – may contain errors or omissions from original podcast audio

If you’ve ever opened your business bank account after a busy month in business, like maybe even your biggest sales month yet, and thought, cool. I made all this money, but where the actual F is it? Or maybe you’ve gone to run a monthly report or quarterly report or an annual report in your accounting program and you’ve looked and thought, how did I make that many sales?

And where the hell has all the money gone? Or perhaps you feel like your business is growing, but when you look at the bank account, it doesn’t seem to agree. If any of these resonate, today’s episode is for you, and I’m going to show you some quick, high level ways that you could do a quick sense check on where your money is going and help you to be right across your bank balance so that you don’t have any money surprises moving [00:01:00] forward.

Before I begin this episode, if you are watching the YouTube version and you are thinking, where the hell is she? She’s not in her usual office. Or if you are listening and wondering why the sound quality is a little bit different, it’s because I’m coming to you from Bali, Indonesia at the moment. I am here on holidays with my family and I had pre-recorded podcast episodes, but we decided to extend our holiday on, which is one of the beautiful blessings of both of us running our own businesses. Our kids are on school holidays and we’re having a great time. We thought, why not just stay a little bit longer?

I was thinking of topics that I wanted to talk about, and this is certainly something that I don’t even, I myself have experienced in the past, and perhaps it’s something that you might have experienced as well, which is that feeling [00:02:00] of how am I earning so much money, but it doesn’t seem to be translating into the bank account.

Now before we dive into the episode, if you are aware that your money needs some work, I am so excited to share that for the first time in over a year, the Fix Your Finances Challenge is coming back. This is a free three day challenge with me where I help you to get your naughty numbers back on track over the three days, what we cover: the fatal finance mistake that you might be making and why blindly handing your finances to your accountant could be costing you thousands. You’re gonna learn how to break the money avoidance cycle. I am gonna teach you how to become a profit leak detective, and you’ll learn the hidden money drains that are sabotaging your success.

You’ll learn [00:03:00] the two number cashflow formula, and you’ll also learn the 15 minutes finance formula. The exact weekly routine that keeps you on top of your finances without you having to drown in spreadsheets. I’m gonna be delivering this training live at the end of July, it’s a really cool challenge. People have come through in the past, have saved thousands of dollars, so it could be well worth your time coming along.

And you can sign up by the link in the shownotes for today’s episode. Okay. Let’s talk about those WTF moments. This is something I hear from smart business owners all the time. You doing the work, getting the clients, the sales are coming in, but somehow the cash just isn’t stacking up in your bank account the way that you thought it would.[00:04:00]

So let’s start with what’s actually happening here. And the feeling that you might be experiencing. So what might happen is that you go to log into your bank account thinking, “oh my gosh, I must be loaded. I’ve been working so hard.” And then you have a look at the bank balance and you think, wait”, is that $300?

How’s that possible? I’ve made $20,000 of sales this month.” It’s that moment of confusion and then frustration followed by that inner voice critic that you have saying, maybe you must be doing something wrong. You are bad with money. You are not meant to be successful. What’s the point in working so hard if I’ve got that little left at the end of the month?

So first of all, I want to [00:05:00] interrupt that negative thought cycle straight away because you are not bad with money, it’s just that you haven’t been taught a system to track it yet. So the first step in changing this dynamic and relationship with money. Is to recognize that just because you earned $20,000 of sales, it doesn’t mean that you have $20,000.

So let’s do a quick sense check. And this is something that you can use to figure out like where the F as in my money go. Alright. Here’s a quick back of the envelope breakdown of where it might have disappeared to. If you are in Australia or a country that has sales tax, instantly you need to remove that percentage.

So in Australia, if you’re [00:06:00] paying GST, 10% is gone straight away for GST. So if you made $20,000 inclusive of GST, there’s already a couple of thousand dollars gone and it’s important to remember with GST or sales tax that this isn’t your money. It never was your money. You are simply being the middleman for the tax office.

Which leads me to the next place that your money might be going, which is tax. Now, depending on how your business and your tax is structured, there could be 30% or more that is going in tax. Even if you haven’t physically paid it out, you should be putting this aside into another account being allocating it for tax.

So again, very, very rough ballpark figures here. This isn’t tax advice. Please talk to your accountant, but let’s just say that you then put another [00:07:00] $6,000 aside for tax there.

Now if you’ve got team, if you’ve got contractors, there’s also the expenses associated with those. And again, depending on who’s in your team and what they’re doing, this could be another like four to $6,000 by the time you build in their on cost, such as superannuation or 401k. And as you can see, this $20,000 is starting to get eaten away at pretty quickly. The next big expense area that a lot of service-based or online business owners might have is subscriptions matter of Canva, zoom, Kajabi, active Campaign, ChatGPT, any AI tools like visual creation, all these subscriptions really add up and I know for me, these come to $500. It could be even more depending on [00:08:00] the nature of your business.

And again, if you have an office space, rent, internet, phone, et cetera. So based on a really, really rough back of the envelope calc, you can see, oh my gosh. That’s why that $20,000 of sales feels like it’s all gone because that $20,000 is now closer to, you know, maybe a couple of thousand three to $5,000 in actual usable cash, and out of that, you might even reinvest some more of it back into your business.

You might have a coach being a mastermind, run some Facebook ads, maybe did a photo shoot. This is why it feels like as your business is growing, that your bank account isn’t growing in the same relationship. [00:09:00] It’s not that you are reckless or crazy, you are just not looking at the full picture. All those other little bits and pieces really do add up, and this is why I’m so obsessed with money tracking, because when you start to understand what’s actually coming in and going out.

You really start to understand your business finances on a whole other level. Money tracking is the dashboard. It gives you control. And money meetings are my favorite mechanism for tracking your money. I’ve spoken before about my weekly money meeting. I also have a a monthly money meeting. I do quarterly check-ins.

There’s a whole process around this that I really recommend for you to be an empowered CEO. [00:10:00] So set aside time. Look at your sales, check your bank balance, complete a cashflow forecast. And if you are listening to this and thinking, oh my gosh, I do need a bit of help in this space. I do have the exact agenda I use for my 15 minute money meeting available.

It’s only $9. If you wanna get your hands on that, click on the link in the show notes for today’s episode, or send me a DM on Instagram. My Instagram is Clare clare_wood_coach. If you DM me the word meeting, I’ll send you a link that you can grab that for just $9. But I will be talking more in coming weeks about ways that you can be more empowered when it comes to your money.

Now, there’s one other thing that I wanted to talk about in today’s episode, which is a concept called materiality. [00:11:00] And this is a concept because my past, if you don’t know, I’m an accountant by trade. I used to work for large corporate organizations and we had this concept called materiality, which means that it’s not worth getting stressed out about a number that isn’t a big deal financially.

So for example. What, what’s material will be different depending on the size of your business. You know, if you are running a multimillion dollar a year business and $10,000 is missing, that really might not be a big deal. It might not be worth the time and effort to track it down. Whereas for a small business owner, 10 grand, my gosh, hell yeah that’s worth the time to go and track it down. The one thing that you need to bear in mind with the concept of materiality is the concept of cumulative cost. So, as much as it might not be a big deal, the, you know, the [00:12:00] $12 app, the $47 subscription here, the $89 tool, these can add up to thousands over time.

And I know with one of my previous clients, they were making about $80,000 of sales a month. And there was a thousand dollars a month expense, and on the face of it, that’s not really a big chunk of their overall income. However, over a year, that’s $12,000. And as I reminded them, I said, Hey, that’s taking your family on an overseas holiday.

So we did dive into that one and we’re able to actually save that a thousand dollars a month. So you don’t need to go into full blown detective mode over every single little tiny line item because that will distract you from the bigger picture. But it is well worth doing a full sense check of your recurring items at least once a quarter.

So [00:13:00] if you are listening to this and thinking all this is resonating, I feel like I’m making good money, it’s all disappearing. Let’s do a few quick and dirty CEO level checks. Firstly, do you know your average monthly expenses roughly? Number two, do you know how much your team costs you? And that includes superannuation, tax, other on costs that might be incurred from having them. For example, they might have subscriptions that you have set up under their name. If you have contractors. Do you know how much your contractors cost you roughly each month? Next, are you regularly checking your profit margins on products or services? An example of this, when you first got started in business, you might’ve been charging your clients $500 a month ’cause you were like, I’m brand new in business. I’m just happy to be making any money. And then now you’ve actually [00:14:00] hired team members to support you. Have you actually gone and done a sense check that you are not paying that whole $500 out to your team. Make sure you do a profitability check at a product and services level.

Which leads me to the next thing. Are you charging enough? What’s your pricing like? And the last thing is, are you paying yourself consistently? If you’ve been in my world for a while, you’ll know I talk about a concept called adjusted profit, and what that means is that we don’t just look at the profit number, we actually look at what you are also paying yourself as part of that.

So director’s wage plus profit equals how much you actually have left over after those expenses. So if tracking is a new concept to you, if you know you need a bit of help in this space, I have my beautiful course all [00:15:00] about financial literacy, which I’m opening the doors to very soon.

If you are new to the concept of financial tracking and you want some help in this space, I would love to invite you to come and join my free upcoming challenge called Fix Your Finances. It’s three days of live training where I actually take you through how to be more empowered with your numbers.

It’s not that you are bad with money, it’s just that you need a system and a coach that can explain it to you in an easy to understand lingo free way. So if you wanna join the challenge, the link is in the show notes for today’s episode, even if you’ve done it in the past, come along and join again. I’m sure you’ll remember.

It’s a ton of fun. It’s really easy, and it can literally add thousands of dollars back into your business. And of course, it’s free to join. [00:16:00] So come join the challenge and if this episode has resonated, and if you’ve got biz owner friends that you think, oh my gosh, I know they need help in this area too, please let them know about this episode.

Tag it on your social media because the more that we can get the word out there about managing your money, the more business owners will benefit. Thank you so much for tuning into today’s episode of The Clare Wood Podcast. I hope you have an abundant week, and I will chat to you again next week.

* Transcript created by AI – may contain errors or omissions from original podcast audio