You’ve made it to the last implementation meeting. You’ve almost learned how to start Profit First for yourself. There’s one final big step to complete before going off on your own. You need to actually do allocations and put what you have learned into practice. If you were meeting with one of our professionals, the fourth meeting would be them observing you going through your first allocation day.
Since you are doing this on your own, you need to be extra diligent. You don’t have a professional to lean on. It would be a good idea to review the previous steps for implementation. You could also teach someone else what you have learned and have them go through today’s process with you to offer a different perspective in case any issues come up.
Everyone’s situation is going to be different in one degree or another. You will have little nuances reveal themselves that you don’t have the answer to, or we haven’t covered.
Profit First is a set of principles with guidelines that help to put it into practice. It’s not a set of hard fast rules that must be followed and never changed or adapted in any way. You are free to tweak the process to whatever works best for you.
It would be good to write all your questions down and schedule a consulting call with a Profit First professional that can provide more specific guidance based on your unique situation.
Before we dive in to the nitty gritty, lets make sure you have followed through with the previous steps and are prepared to do your first allocations.
- Do you understand the core principles of Profit First?
- Is your bookkeeping accurate and up to date?
- Have you decided when your rhythm day will be?
- Are all your bank accounts set up?
- Have you fully analyzed and cut expenses?
- Do you know your current debt situation and have a plan to pay it off?
Today’s the day you’re going to put everything in action. You know how to start Profit First, now it’s a matter of putting that knowledge to the test. Remember you are doing this about every 15 days, so once you get a feel for everything, it won’t take much time at all. Obviously, some days will be more involved than others, but overall, this will be a smooth process for you. Way less stress.
Open up your spreadsheet and find your allocation percentages. Next, go into your actual INCOME account and then using that amount and your percentages, calculate the exact dollar amount you are going to transfer into each account. Then make the transfers. Now your money is where it needs to be to serve its purpose.
Get all your bills out and go into your OPEX (Operating Expenses) account. Most, if not all, of your bills will be paid out of this account. The amount you have in that account is what you have available to pay your bills. If your current bills add up to more than you have, then you will need to do some prioritizing and put off some of them until next allocation day. Do not dig into your other accounts! Ever! It may be hard at first and feel impossible, but you will adjust and before you know it, your business is more lean and more profitable than ever.
You are only looking at your transactions since the last allocation day. So about 15 days’ worth. For this first one, you are just looking at the transactions since you last updated your books (which should have been done recently if you are following all the steps). Do a simple analysis. Make sure everything is legit. The critical thing is to do your bookkeeping. Input all those transactions and make sure your books are in good order. Do a quick look at all your expenses and make sure nothing is trending in a way you don’t want. Again, because you will be doing this every couple weeks or so, it will only get easier and quicker each time.
With this four-part blog series, you have all you need to know how to start Profit First on your own. It’s well worth the effort to properly implement Profit First from the beginning. Your cash flow will improve significantly and managing it will be almost stress free.
All of this can be overwhelming and sometimes a little technical. We are glad to help with implementation if that’s all you need or a one-time consulting meeting or we can totally take the stress away from you by doing it all – implementation, monthly bookkeeping, and all your monthly allocations.
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