Are you tired of watching your business struggle from paycheck to paycheck? Wondering where all the money goes? Do you wish there was a better way to secure profitability and financial stability for your business? Ever heard of the Profit First method? The main idea is to put a percentage of your business income into different accounts, the most important of which is the Profit First account. 

The Profit First method is a revolutionary approach that transforms your business finances. Mike Michalowicz might have introduced the whole idea of the Profit First method in his book-Profit First: A Simple System To Transform Any Business From A Cash-Eating Monster To A Money-Making Machine, but the Profit First method is more than just a book; it’s an entire money management system for every business needs. 

At its core, five essential accounts are the backbone of the Profit First method. In this blog, you’ll discover what the five Profit First accounts are and how to take control of your business with these accounts.

1. Income Account

We like to call it the money-maker. The Income Account is where all your revenue goes and is the lifeblood of your business. Like all other forms of financial management, every cent you earn flows into your Income Account. However, unlike traditional finance management, which gives the least priority to profit, the Profit First method prioritizes profit. So, instead of immediately allocating all your income to business expenses, your first step is to transfer a percentage of your income to your Profit Account.

2. Profit Account: Putting Your Financial Reward First!

Now, this is where all the magic happens. The Profit Account is your financial reward for running a successful business (you should be proud of yourself!). With your Profit First accounts, profit is not an afterthought or a miracle you hope for at the end of the year, it’s an immediate priority! A percentage of every dollar sent into your Income Account is allocated to the Profit Account. This ensures that you are disciplined enough to set aside money for yourself to reward your dedication and hard work.

3. Owner's Compensation Account

If compensation is the last thing you think of when your income comes in, the Profit First method will change your mind. Just like your workers get paid, you deserve compensation at the end of the day. One of the most common pitfalls entrepreneurs encounter is neglecting their own compensation. However, Profit First flips the coin by ensuring that you pay yourself first. The Owner's Compensation Account is a special account that lets you allocate a portion of your income to cover your salary. Ultimately, it helps you maintain a healthy work-life balance and ensures your business remains profitable.

4. Tax Account

Taxes can be annoying, from filling out forms and trying to wrap your head around how huge your tax bill is- it is a mess. But as unsettling as taxes can be, they are necessary. With Profit First, you can finally say goodbye to tax headaches. With your Tax Account, you can set aside a percentage of your income to cover your taxes. By proactively saving for your tax bill, you can get rid of the stress that comes with the tax season and ensure you have enough funds to meet your tax liabilities.

5. Operating Expenses Account: run the show with ease

The Operating Expenses Account covers all your business expenses, from salaries to utilities, rent, and supplies. What makes Profit First different is that your expenses are limited to what is left after allocating money to other accounts. This ensures that you can run your business efficiently and keep your expenses in check.

While implementing the Profit First method may require a few adjustments and discipline, the rewards are worth it, especially when you use a tool like Cash Goblin that helps you automate the whole process of putting a percentage of your income into your Profit First accounts. It's a game changer for business owners, providing profitability, clarity, and financial peace of mind. 

Want to learn more about Cash Goblin? Start here

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