Strategies to Keep Your Cash Flow Working for You!

The “busy-ness” is ramping up in the Amazon world as sellers prepare for the 4th quarter holiday season. Before you get caught up in all the action, take a few minutes now to prepare your strategy and it will make executing much easier during the busy time.

Profit First Bank Account Strategies for 4th Quarter

Here are a few strategies to consider. Decide now which ones will ensure that you are managing your cash responsibly.

Check in with your CPA

While your sales may vary of the last quarter, you have three quarters of the year behind you. If you have been withholding or paying estimated taxes, you have set money aside based on last year. Let’s hope this year’s sales are higher and you have more profit to show for it. Project out your P&L for the rest of the year and ask your CPA to project what you will owe.

Compare that with what you have withheld or paid in estimated taxes. If you’re going to be short, beef up the amount you are allocating to the tax account. If you have excess, then reduce your percentage so you can put that money to a better use, like paying yourself!

Set Aside the Sales Tax 

This is also a great time to look at what will be owed for sales tax. Have you set aside these funds in a separate bank account? As you are paid by Amazon, your payment may include sales tax collected from the buyer to be paid to the state by you. This is not your money.

Sales tax is typically paid monthly, quarterly or annually. Look at what you owe and ensure that you have that money set aside. It’s very tempting to use that money to buy more inventory because you are sure you will bet it back. This is a dangerous game. First, it is not your money. Secondly, it’s harder to come up with these funds in January when sales typically always slow down.

stacks of money

Manage Your Inventory 

If you’re using Profit First, you most likely already have an account for inventory.  Ensure that you are covering your costs when you make your allocations.

If you want to grow your business, allocate an additional percentage based on your planned growth rate. This will allow you to set aside those funds and be ready to grow organically rather than rely on debt.

Set Aside Profit and Owner Pay

It’s so tempting to put every penny back into the business for the sake of growth and a payoff down the road. But nothing is more depressing than hearing a client say, “I worked so hard and I didn’t make anything for my efforts.” Profit and paying yourself is a habit built in from the first sale.

It’s not something to be delayed for 5 years. That is a myth. Yes, as you grow, you should be able to pay yourself more. But don’t set up the business from the start ignoring the financial needs of its most important employee – YOU!

Set Desired Balance Level for Expense Bank Account

Take look at your typical monthly operating expenses. What is the monthly total throughout the year? Set that amount as the desired balance level for your Operating Expense bank account. Watch the account and even set alerts on your mobile banking app to notify you when you exceed this level.

Anytime you exceed the desired balance level of your operating expense bank account, move the excess amount into your Profit Account. This safeguards against Parkinson’s Law. Basically, the law says, “You use what you’ve got.” We want to get it out of sight until we have a chance to really think about the best use for the money.

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In January after the dust has settled, then it’s time to assess your situation again. Do you have adequate funds for sales and income tax? Do you have the funds needed to pay for future inventory buys or growth?

Determine how much of the funds that you’ve set aside will be needed for a business model change or new product development, or for covering payroll or operating expenses during a slow period or “rainy days” to come. Following these strategies in Q4 will set you up to make good decisions when you have time to think, not when you’re too tired to think!

Learn More!

You can learn more about creating and implementing these accounts in my book, Profit First for Ecommerce Sellers. If your ecommerce business isn’t where you’d like it to be in terms of profitability, this book answers important questions about how to put Profit First to work in an ecommerce business.

If you run into issues opening your bank accounts, here is a listing of banks that have been Profit First-friendly in the past. Take control of your money and your business, and put Profit First to work for you!


Post Author Cyndi Thomason


Cyndi Thomason is founder and president of bookskeep, a U.S.-based accounting, bookkeeping, and advisory firm for ecommerce sellers worldwide. She has a passion for data analysis and process development. She uses that passion to educate her clients and help them structure their businesses to maximize profits.

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