00;00;05;21 - 00;00;26;01

Unknown

You're listening to the Profit First for Real Estate Investors podcast. This show is all about helping real estate investors and entrepreneurs bring clarity and structure to the financial side of their business. In these sole episodes, we focus on practical financial strategies that real estate investors and business owners can actually implement, whether it's profit, cash flow, forecasting or mindset.

00;00;26;02 - 00;00;53;12

Unknown

The goal is simple to help you run your business with more confidence and less financial stress. Enjoy the episode. If you're reporting is 30 or more days old, then your decisions are 30 or more days. Wrong. I've had so many people. I literally had a guy last week where he said he was getting numbers, but they were always two months behind, like they'd close out books and numbers and his bookkeeping team and the financial team.

00;00;53;13 - 00;01;09;04

Unknown

But then he would go to look at the numbers and then they were wrong. And so he'd have to go back to them and say, no, this is wrong. And then it would take another 30 days. So 60 days past when he actually had the books, clothes or should have had at the end of the month. That's when he was getting his numbers.

00;01;09;04 - 00;01;31;19

Unknown

And he's saying, I can't make decisions from these anymore. Now I can just see that in the past, but I can't predict and forecast or making sure that I have actual good decisions. So he said, I'm making a lot of decisions by my gut feeling right now, and you probably feel that way as well, if that's what your business is running off of or if you don't have numbers whatsoever.

00;01;31;19 - 00;01;53;09

Unknown

I run into that a lot. You'd be very surprised. I run into a lot of people that are doing even more than seven figures, and sometimes they don't even have anything. They don't have a QuickBooks file, they don't have a spreadsheet, they don't even have numbers on a napkin. And some people don't have anything in place. So how are you supposed to get reporting if you don't have anything?

00;01;53;10 - 00;02;12;26

Unknown

Like, what are some of the first steps to make sure you build some good reporting? What is good reporting? Any good reporting here? Let's start with the end in mind. Good reporting helps you make a decision. So that's why when I open this up, if it's 30 or more days behind, the decisions are more than likely wrong. You might be the needle in the haystack.

00;02;12;26 - 00;02;42;03

Unknown

And every once in a while, right? What is it? A blind squirrel finds the acorn every once in a while. I don't want that to be how you run a business, though. A business can be run a lot more by the numbers. And no, you cannot always prepare for everything. I get that I'm very realistic as well, but when you have numbers and you have some stability and predictability, that's when the numbers are even more crucial to be able to make the decisions you want to make.

00;02;42;08 - 00;03;04;23

Unknown

I'll also say to one of the biggest reasons people stay up at night as entrepreneurs, I've talked to now thousands of entrepreneurs about their finances, about their money, typically a taboo topic that most people don't want to talk about. Thankfully, they trust me. They trust our company. They trust what we provide and what we're doing to be able to even open up, which I'm very thankful for when they do.

00;03;04;23 - 00;03;30;12

Unknown

But you know why? Most of them say that they lose sleep at night. It's not because they're losing money. It's not even because there's some bad decisions made. They lose sleep at night because they have money that's coming in and out, but they don't know. They have no clarity. They're losing sleep at night because they have that money, like I said, but they don't know how much.

00;03;30;14 - 00;03;48;04

Unknown

Are they losing money? Are they making money if they feel like the cash is going out faster than it's coming in? Is this a trend or is our business going under? They don't have that clarity. They lose sleep at night. Not because they're losing money, but they don't know how much. I don't want that for you. We need to get the reporting on track.

00;03;48;05 - 00;04;08;26

Unknown

We need you to be also better than 60 days behind. Like that guy was that I was talking about just a couple of minutes ago. I want you to have reporting, whether it's weekly or bi weekly. If you do have it monthly, that's like the the longest that I would wait. But there's no excuse for you. Not within when a month closes.

00;04;08;26 - 00;04;32;22

Unknown

Not to have actual numbers within your hand within the next two weeks. Usually it can take anywhere from 5 to 15 days, whether it's an internal person, if it's an internal bookkeeper, an internal financial person, it might be closer to like the 1 to 5 days because they might be doing inputs every single day. If you're working with a third party, it might be closer to the 5 to 15 day mark, but it should never be longer than 30 days ever.

00;04;32;22 - 00;04;58;21

Unknown

So if that's what's happening now, a couple things. It could be the person that you've hired does not know what they're doing. You might not be getting the report you're wanting because and the on time report because that person doesn't know your industry. Real estate. This is really easy to get someone in the door because they're a warm body and because they've said they've done bookkeeping or they've done financial numbers before, but they don't actually know what you do.

00;04;58;21 - 00;05;17;16

Unknown

And your exit strategy and how do I enter these things? And then you look at the numbers and you're like, what the heck is this? Or they're not getting it done on time because they also feel that, okay, I'm trying to put these numbers in and I feel like this is the right place. And if your bookkeeper is saying that, it's probably not the right person just throwing that out there.

00;05;17;16 - 00;05;36;15

Unknown

So that could be number one, that the person doing the actual numbers does not know your industry. Another thing of why you're getting reporting late, and why you might not be getting the actual numbers you need to make a decision is that as the owner, you don't know what to look for. As the owner, we need to know to look for certain things, like on a balance sheet.

00;05;36;21 - 00;05;59;14

Unknown

We're going to get really tactical here. On a balance sheet you have assets and liabilities. An asset is what you own. A liability is what you. Oh. So if you ever have on your balance sheet a negative asset account meaning you've got one, two, three Main Street and it says -150,000, that is a red flag. You should not have negative assets.

00;05;59;14 - 00;06;22;08

Unknown

And on the liability side because it's already a liability. There should be no negative liabilities on that side. Like it's a little negative mark at the beginning of the number. So let's say you had a $200,000 loan against that $150,000 house, and the loan says -200,000. That's a red flag on your profit and loss, with the one that most entrepreneurs know to look at.

00;06;22;08 - 00;06;40;17

Unknown

If there are anything that is out of whack, like, let's say you're doing a fix and flip property. If on the profit and loss, you have that fixed and flip while it is still being worked on, on the profit and loss that is a red flag, it should sit on the balance sheet until you've sold it. Then it sits on the profit and loss.

00;06;40;19 - 00;07;00;11

Unknown

These are just a couple tactical things for you to take back to say, okay, are we really is my person who is doing my numbers, actually doing what they're supposed to do? And those were just a couple things if you're a fixing flipper. But honestly, the balance sheet one is for any entrepreneur anywhere that has assets and liabilities, you shouldn't have negative.

00;07;00;13 - 00;07;22;21

Unknown

The other thing I want to tell you for this specifically, if you're reporting is more than 30 days out, number one, is your bookkeeper or your financial person really the right person? Do they understand your industry? Number two. Do you know what to look for? The other thing, too, is your cash. Like, do you know your cash movement and being able to tie actual numbers from your reporting to the cash movement?

00;07;22;21 - 00;07;42;15

Unknown

That's why the cash flow statement is so important. It's basically in hieroglyphics for a lot of entrepreneurs, though, because you have different activities like operating investing activities, financing activities as well. Those make up the three main components of the cash flow statement. And a lot of owners don't know how to read that or they never even open it up.

00;07;42;15 - 00;08;07;20

Unknown

But it's literally telling you how your cash is moving. In a real estate company, it's even more important that report, if you're not getting that report on a regular basis or looking at your cash, then you're probably going to be wondering, where did all my cash go? Even if your profit and loss says, oh, I made 50,000 this last month, but your balance of your bank accounts is like less than five, and you're like, there's no way I made 50 because I only have five in my accounts.

00;08;07;20 - 00;08;23;02

Unknown

That's because the reporting isn't really getting you what you really need to make the best decisions. You might be making decisions based on the cash that's coming in right then when you sell a deal, but not the end of the month of like, okay, how are we actually doing it as a business? What do I need to invest in?

00;08;23;03 - 00;08;42;15

Unknown

Should I invest in this deal? Because if I invest in this deal or I invest in this next contract or whatever it might be, will my cash balances go way down and will I be comfortable with that? Reporting is all about you, the entrepreneur, knowing exactly where the dollars are going so you can make the best decisions. Because at the end of the day, you want to get paid.

00;08;42;17 - 00;09;04;26

Unknown

You want to make sure you have reserves to be able to build a business. You want you be, you want to scale, but you want to scale profitably. But without reporting, that's up to date, that's accurate, that's timely. You're making all the decisions on a gut feeling and a gut feeling. I'll tell you right now, if you are below a seven figure revenue line, gut feeling can get you to seven figures.

00;09;04;26 - 00;09;24;09

Unknown

And I'm telling you that. But here's the caveat. You might be able to get to seven figures in revenue on gut feeling, but you will not keep seven figures and you will probably not even keep 20%. You might keep 10% or less, or be negative, because all you've done up to that point is gut feeling and no reports.

00;09;24;10 - 00;09;39;17

Unknown

No numbers. You're probably feeling like your cash is going out the door and you're like, where did it all go? So this is why reporting is so important and why you need the right person that understands your industry. But then also you need to know as an entrepreneur, what are the things that I should be looking out for.

00;09;39;17 - 00;09;57;04

Unknown

And then cash knowing what is the cash movement? That's why I love profit first. That's why I teach it so much. That's why we implement it. It's a simple cash system that's basically a very simplified version of the cash flow statement. It tells you where's your money going and gives every dollar a name. So those would be the three things.

00;09;57;04 - 00;10;13;17

Unknown

If you're not getting the reporting that I would look out for, for you right away, to go back to say, I'm tired of this. I'm tired of not living by the numbers. I'm tired of not having the reporting that I really need. These are the things that you need to implement and go right back to your business to be able to now run your business from the numbers.

00;10;13;18 - 00;10;32;13

Unknown

Thanks for spending time with me today. If this episode gave you clarity or a new perspective. Be sure to like, subscribe, and comment below if you're ready to apply what we talked about today with real guidance and accountability. Visit Profittrei.com to schedule a free discovery. Call with us to create your path to financial clarity and freedom.