Note from Donna… Thank you to all those who congratulated me on becoming a Certified Profit First Professional. This cash management system certainly has me thinking about financials and communication to clients in a different way. This system has helped thousands of business owners transform their businesses to support the lifestyle they want to achieve. If you’d like to know more about it, reach out and ask me for a ½ hour introductory call.
It has been my experience that when I’m learning something new it truly helps to break it down into smaller bite size pieces. Implementing the Profit First system can feel foreign and when something feels foreign, often times the result is resistance. I’ve known about Profit First for years. I have even done a newsletter series on the books a few years back, but it wasn’t until I decided I was going to implement it that I fully realized the power of the system.
Let’s take a look at one of the theories behind the system.
Small Plate Theory –
When we need to consume less whether that be time, money, food, or other resources it’s best to put things on smaller plates. I have experienced this firsthand with food. It is rare for me to dish myself on a dinner size plate. I use a dessert size plate. I only eat what can be put on that plate. It’s amazing how satisfied I am on the smaller portion.
The same is true for money. Profit First uses Bank Balance Accounting to make this happen. Having several Accounts for specific purposes allows you to know if you have funds for a specific type of event.
The basic Standard bank accounts for a Profit First Set up is:
Income Checking Account
>> Profit Checking Account
>> Tax Checking Account
>> Owner’s Pay Checking Account
>> Operational Checking Account
The money flows into the Income account and gets allotted to the other 4 accounts based on percentages. Now you have the start of Bank Balance Accounting.
The concept and implementation of Profit First is Simple. Sticking to it is the hard part. Our jobs as Profit First Professionals is to help you navigate the unique challenges that inevitably present themselves.