Cash is King! (or Queen)
Nov 08, 2022
Once you have taken stock of the debt situation you are in, it’s time to make a plan for Debt Reduction. In order to pay down your loans quicker, you must have additional cash flow (profit) in the business.
The Profit First model is great for this because you are already setting aside money in the Profit Account. Once you really get a handle on the overhead it’s simple to put more in the Profit Account.
The Profit Account is used for quarterly distributions to the owner doctor. Remember, this is the pay for doing dentistry in the practice. The Profit Account may also be used to pay additional principle on any business loans or credit card balances.
When you decide to use part of the distribution for debt reduction, the owner will now take less in distribution for personal use. For example, the typical owner distribution would be 50% of the Profit Account deposits for the quarter but with focused debt reduction, the owner might take 20% and the additional 30% would be applied to the loan.
When you operate this way within the Profit First model, you are using the Cash on hand to help you.
Yes, Cash is King!!
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