Part 2 | Lead Cash Reports
Now, we are getting to the good stuff. We are going to talk about the Lead Cash report or Lead Profit report. We use the terms interchangeably, but they are the same report. This report helps you spend your money ahead of time. It’s like your business budget, but much more motivating.
How Much Do You Really Have?
Do you ever wonder exactly how much money you have to spend? Or how much you have to invest or pay your bills? Looking at your bank balance for the answer is a TERRIBLE IDEA. It only tells you what you have in cash now, not what you’ll need it for over the next month. So many entrepreneurs do their books too late to understand how much money they really have after upcoming expenses. They don’t plan for the future, so they rely on the past to guess at the money they’re going to have. Instead, we want you to make all important decisions one month ahead, so you know where your money is allocated before it hits your bank account.
If you don’t have reports telling you how your money should be allocated, you’ll run into trouble in a lot of areas by spending that important money or, worse, go broke as you grow. The number you see in your checking account should be irrelevant to figuring out how much you have to spend. You will, from now on, only look at your lead cash report to see how much working capital or excess profit is left to pull out of your business after expenses.
Cash reports help you spend your cash on paper before you ever touch it; to spend it ahead of time by developing your skill for forward thinking, instead of in a compulsive, haphazard way (listen to this podcast if you want to know why this is so important). This makes handling money much easier. You know exactly how much money you have and where it’s allocated without needing to do a lot of research. By using a lead cash report this way, you know if spending or investing is a good or bad idea within minutes.
The report itself is broken up into the following sections:
To summarize, you need to set your goals, determine how much you need to invest in them every month, and spend the money on paper before you ever receive it. This way, it’s already spoken for when it hits your account and looking at your bank balance becomes irrelevant. When you refer to your cash report to see what’s available to spend, you’ll know when you do spend it that it’s free to use and you’ll never have to feel any guilt or worry about spending. Please take the time to get to know this report. Watch the following video, then download the report and instructions on how to use it from the links at the bottom of this page.
Reactive vs. Proactive
In the video, we discuss lead cash reports. This should help you learn a very valuable lesson in business management, specifically the difference between proactive and reactive management. Being reactive, which means making decisions as they come up, often leaves you with no idea exactly where you really are or what you need to do to get where you need to be. One approach you can take, which I personally use, is to set your revenue for the year at the beginning of that year, then break that down into what it needs to be per month and per product. This way, if you fall behind on one month, you know exactly how much you need to catch up by and, if you end up doing better than you thought, you know you don’t need to push as hard.
One thing we recommend is that you put your profit into its own account and don’t touch it until the end of the year. That way, you can be sure that the profit you’re taking out of your business is real profit and that you won’t need it for something else later, like to make up the shortfall in a slow month. As soon as you start taking money out of that account regularly, there’s a good chance you’ll find yourself in trouble later when you need it.
We have what we call Yellow Pad reports, as well as Excel spreadsheets. We highly recommend that you start off by using the yellow pad report and manually tracking (yes, with pencil) for the first few months, until you are sure you fully understand the reports and how they work. Then, you can get fancy by using the Excel spreadsheets.