Karl Marx said that profits are the “surplus value” stolen from the workers. Modern theory not only proves him wrong, but as Peter Drucker states, “Profits are the only source of jobs for workers and of labor income”. He goes further to state that profits are the only way to guarantee the company’s future existence, because it is the only source to fund innovation, capital investments and the constant necessity to stay current with the market requirements.
If this is the case, profits should not be left to the end of the year, when the accountant tells you whether you own taxes to the IRS, or the IRS will give you a refund for the taxes you have pre-paid. Profits should be your daily objective, and you should be able to quantify your profit in every transaction that you do.
If you have a well organized chart of accounts and you keep up with your financial information, this should not be too difficult. In fact, once you have a good grasp of what your fixed expenses and your variable expenses are, you can project your profits as you bid on jobs. This applies to the execution of jobs as well, since you can develop a model, or budget, for every one of them and keep tabs on your expenses as the job progresses. This allows you to be a proactive manager.
A proactive manager anticipates the potential hurdles of the company and makes the necessary decisions to correct them in time to keep as much profits as possible. This cannot be done at the end of the year. If that is the case, you are letting profits be a byproduct of the company’s activities and not the central reason of being in business. Furthermore, if you are using an external accountant to compile your tax information, she will do her best to arrange that information to pay as little taxes as possible and that is her job. That function does not help in the daily running of the business, when you need relevant information to make pricing, purchasing, hiring and investment decisions.
Lanata & Solis Business Consulting Services, L.L.C. specializes in designing the financial structure that allows you to get this information. We also help you understand the information that your accounting records provide you, so that you can use it to make the strategic and critical decisions to keep as much profits as you can. This is the only way to sustain your company into the future and to give you and your employees a guaranteed livelihood.
Give as a call today and we will give you a complementary one hour appointment in your office to assess your needs, and to create a tailored solution that addresses your requirements.