Why does using Profit First set you up for success in a way that no other system can? Because it doesn’t just tell you “pay yourself first;” it shows you exactly how to do that. Most small business owners don’t realize that the first question to ask themselves is “how many bank accounts should I have for my business”? Profit First has the answer.
By dividing up your money into different bank accounts by purpose, you can easily see just by looking at the bank balance if you are using up your money faster than you are refilling your account — long before you run out of money. This gives you time to try new marketing strategies or products from a place of relaxed curiosity, rather than desperate panic.
You know at a glance if you are on budget or overspending, while there is still time to make changes.
Do I really need four bank accounts for my business?
Profit First has a profit savings account (for growth and emergencies), an owner’s pay account (to help smooth out seasonal pay crunches), and tax savings accounts so that you always have enough to pay what you owe and can stop borrowing money from yourself. So, Profit First not only sets your business up for success, it helps you create long term stability in your personal finances as well.
The Profit First cash management system works alongside your bookkeeper and accountant, it doesn’t replace them.
Your bi-weekly allocations to your accounts let you get insight into the cash movement of your business. You should still have bookkeeping software set up to answer the questions you are asking about how you are earning and spending, and you should still have a tax accountant to help keep you in compliance and paying the least amount of tax legally possible.
But without that missing ingredient of the cash management system, you are relying on reports about what already happened to help you predict the future instead of being ready for the present moment, no matter what it brings.
Check out this replay of an Instagram Live where I go into more depth on how to reframe your view of your business, then join us on Instagram @moxiebookkeeping.
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