Why I’m All About Putting Profit First

You know how it is when you first hear something that’s new to you — a concept, philosophy or unique word? And then you hear the word again and begin to pay attention to it even more? That’s how it was for me when I first came to hear about Profit First, a cash-management system that helps business owners create long-term success by putting profit first.

A few years back, one of my clients told me she had read the book Profit First: Transform Your Business from a Cash-Eating Monster to a Money-Making Machine, by Michael Michalowicz, calling it transformational and saying she’s now paying more attention to her accounting reports. (As a long-time bookkeeper, I wouldn’t call these reports transformational — more so, essential — but I was happy to learn of her new focus!)

I bought the book and read it. The concept made sense to me, both professionally and personally. (More on that shortly.) Then I had a second and third client tell me about the book. I re-read it more critically this time and from my clients’ point of view and not from a bookkeeper’s perspective. (Sometimes I forget that not everyone does what I do for a living!)

I started to see how the put-profits-first philosophy offered more than what the Moxie team and I do in just reconciling clients’ books each month. Profit First helps business owners get more clarity and control over how they earn and spend money. And it’s really not about how much money they make — it’s about how much they keep!

Profit First helps business owners get more clarity and control over how they earn and spend money.

Profit First Philosophy

I’ve been a proponent of earmarking funds for specific purposes for years now, including my personal expenses. I have a house account, where essential monthly recurring bills get paid from, a cost-of-living account for food (both groceries and dining out), a self-care account … and I could list a few more.

Separate accounts for your business are at the heart of the Profit First philosophy, and that’s why I love it.

Here are four principles that support the methodology, along with how they could be applied to your business:

• Use multiple bank accounts (yes, accounts, plural) – Many businesses just have one account and, perhaps, a savings account, too. The Profit First approach champions five bank accounts — Profit, Owner’s Pay/Payroll, Operating Expenses and Taxes, along with an Income account. (Income could be the account you already have established at your bank.)
• Pay yourself first (via the Profit account), then fund the other accounts ? Decide what percentage of business income is needed to adequately fund each account. (I can help you with this, as I’ll mention in a moment.) If you’re not used to paying yourself anything beyond a paycheck, you could allocate at least 1% of your income to the new Profit account.
• Experience the benefits of giving every dollar a home ? When you move company income into the additional bank accounts (Profit, Owner’s Pay/Payroll, Operating Expenses and Taxes), this removes the temptation to spend money that’s critical for other purposes. It’s the out-of-sight/out-of-mind concept. With multiple accounts, you’ll see more clearly how much money is available for your business’ assorted obligations — from realizing profit to meeting payroll to buying new equipment to paying IRS and state taxes.
• Be consistent when allocating the funds ? On the 10th and 25th of each month (or two dates you choose and stick to), move money from your Income account. Every. Single. Dollar. Getting into the rhythm of doing this helps you keep the Profit First philosophy top-of-mind. Plus, funding the four accounts on the 10th and 25th helps you meet bills that are due on the 15th and at month-end.

The Profit First approach champions five bank accounts — Profit, Owner’s Pay/Payroll, Operating Expenses and Taxes, along with an Income account.

How to Know if This is Right for You

I can’t imagine a business not benefiting from the Profit First approach unless it’s already mastered similar concepts.

Profit First is right for new business owners who want to establish a sound financial framework — one that focuses on profit first and business sustainability.

The approach is also great for owners of established businesses who want to tighten up financial practices and become more profitable.

Hi, I’m Ean Murphy, Your Profit First Professional

In 2018, Moxie went all in on Profit First: We spent time getting immersed in the cash-management program in order to successfully coach business owners on the concepts and strategies core to the approach. Moxie became a Certified Profit First Professional firm, with three members of our team achieving Profit First Professionals certification, as well.

If you’re interested in exploring Profit First, I encourage you to take action with one or more of these steps:

• Download our Profit First overview PDF.
• Watch this Profit First success story on YouTube.
• View the first two chapters of Profit First (or you could go all in and buy the book).

If your gut's already telling you Profit First is a must for your business, take one of these steps:

• Check out our Profit First Basics digital course. (It’s free if you’re a regular client of Moxie’s.)
• Schedule a complimentary, 30-minute call with me, where we’ll talk through your current financial situation.
• Choose one of our Profit First support packages, such as the one called Single Scoop (because ice cream). It’s a one-time, complete assessment where we help you determine the separate bank account allocations and give you a plan to implement.

Moxie Bookkeeping is a Certified Profit First Professional firm.

Ready to Focus on Cash Management?

If you know Moxie Bookkeeping even a little, you probably know of our commitment to helping business owners better understand their financials, so they can experience peace of mind around their company’s money.

By adding Profit First to our services, we’re putting more focus on helping business owners take home more of what they earn. We’ll be talking more about Profit First in the months to come on our blog and in discussions with clients. As I said, we’re all in on this!

We’re truly excited about Profit First’s potential for you and your business and for the opportunities it’s giving us to create deeper, more meaningful — and even more fun — relationships with our valued clients.

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This article was originally published on the Moxie blog. If you'd like to be notified of new blog posts and other Moxie news (such as, best practices in bookkeeping and cash flow management and, of course, about Profit First), please share your email address with me.