Finance
Finance questions, answered.
Cash, debt, profit, and the numbers that tell you the truth.
How much cash should I keep in the bank?
Three to six months of operating expenses, separated from the operating account, untouchable except for emergencies.
How should I pay myself as the owner?
A real W-2 salary at market rate for what you actually do, plus owner distributions from profit. Not random transfers when the account looks fat.
What numbers should I watch every week?
Revenue, gross margin, cash on hand, and AR over 30 days. Four numbers, 10 minutes, every Monday.
How do I get my customers to pay me faster?
Invoice the same day. Make it easy to pay online. Charge a late fee. Follow up at day 7, 14, and 21 by phone, not email.
Should I take out a business loan?
Only for an asset that will generate more cash than the payment. Never for payroll or operating shortfalls.
How do I survive a slow month?
Cut variable costs fast, talk to vendors before you miss payments, and call every quote from the last 90 days. Don't panic-discount.
Do I need a bookkeeper?
Yes, the moment revenue passes $250-500K, or sooner if you hate the books. The hours you save will be worth more than the fee.
How much should I save for taxes?
25 to 35 percent of net profit, in a separate account, touched only on tax day. Don't trust yourself with it.
What profit margin should I target?
Net 10 to 20 percent for service trades after a real owner salary. If you're under, prices, costs, or both are wrong.
Should I form an LLC or an S-corp?
LLC the day you start. S-corp election once net profit is consistently over $50K. Both done with a CPA, not a $99 web form.
How do I actually read a P&L?
Top is revenue. Subtract direct costs to get gross profit. Subtract overhead to get net profit. Three numbers, not 30. Look at them monthly.
What's the difference between cash flow and profit?
Profit is what you earned. Cash flow is what's actually in the bank. Profitable shops die of cash flow problems all the time.
What insurance do I actually need?
General liability from day one. Workers comp the day you have one employee. Commercial auto if you drive for work. Umbrella when revenue gets serious.
What do I do about a customer who won't pay?
One polite call. One firm letter. Then small claims or collections. Don't let it drag past 90 days, the recovery rate falls off a cliff.
Should I track profit on each job?
Yes, by job type at minimum. The shops that don't can't tell you which work makes money. They guess, and their guesses are usually wrong.
How do I legally pay less in taxes?
Hire a CPA who specializes in small trades. The right S-corp election, retirement plan, and vehicle deductions usually pay their fee five times over.
How do I build business credit?
EIN, business bank account, business credit card, vendor accounts that report to Dun and Bradstreet. Two years of consistency and you have real business credit.