About two years ago we read the book Profit First. In the book the author essentially tells you how you can gain control of your finances. Most people consider profit to be the money that’s left over at the end of the month. But, the author of this book says profit is something that you need to pay yourself first and whatever is left for the rest of the month is what you get to spend. We put these ideas into practice right away and took a good look into our monthly expenses.
What we found was that we had roughly the same expenses every month with one big exception – payroll. At the time we were paying employees every two weeks, as is fairly common with many businesses. The problem with that is that it meant a couple of months out of the year there were three payrolls instead of two. From an employee’s perspective that’s not really a bad thing because it’s almost like getting extra money in the month. But, from the business side it made it difficult to budget and it really affected the books in the months there were three pay days.
It took a couple of months of tracking expenses to figure this out, but once we did we decided we wanted to standardize our expenses as much as possible. Moving payroll to twice a month required some preparation on our part, coordination with our accountants, and letting our employees know what we were planning to do ahead of time. Our change went into effect a little later than we had planned but it was necessary in order to get everything right.
Since we made the change it has worked out great. We are able to budget and our books are much cleaner. We have never looked back.