What Is Profit First Bookkeeping and Can It Help Your Business?
Profit First is a revolutionary accounting system that throws out the old rules of accounting. This method takes a percentage of the sales to pay owners first. Separate accounts are created to set aside certain percentages of what’s left for other costs. Owners must modify their expenses to fit the model. Profit First turns businesses into money-making machines. It’s a system that’s easy to understand and use. Here’s a little more information about what Profit First bookkeeping is. A professional service like Venus Michael Account-Ability can get you started with this proven method for increasing profit.
New bank accounts will have to be set up for your business and named for each expense. You will need a savings account labeled Owner’s Pay, another for Profit, and another for Taxes. Your business will need a transaction account for Operating Expenses and another for all sales deposits called Revenue. It may seem like a lot of accounts but they all serve a purpose. There is a Target Allocation Percentage formula that is used to determine what percentages of sales go into each account.
When a deposit is made into the Revenue account, it’s time to determine how much of it will be deposited into each of the other accounts. Stick to the plan and spend only the money you have allocated for each account. Profit First keeps the cash flowing smoothly and helps businesses control their expenses. It is a great way to manage expenses and curb excess spending.
The Profit First strategy ensures that your business is permanently profitable. If a business sticks with this accounting strategy it is guaranteed to be successful. Profit First professionals can help you come up with the right plan to grow profits and be successful. This system makes accounting easy and gives you more clarity when it comes to finances. You can easily see where you stand in all areas of your financial report by looking at your accounts. Profit First makes spending decisions easier when you know exactly what you have to work with.
With Profit First, maximizing your profit begins as soon as you implement this system. When you make a sale you make a profit and still put away what you need for other areas. This changes the way we think about cash flow completely. Profit First bookkeeping subtracts profit from the sales total first, then leaves the remainder to be used for expenses. It ensures that your pay as the owner comes before the rest. Traditionally, business expenses are subtracted from sales totals leaving the remainder as profit.
Profit First bookkeeping changes the way money is spent as it comes into the business. When a certain amount of money is budgeted for a specific purpose instead of having it all at your fingertips puts limits on spending. This accounting system makes you take more time prioritizing purchases from what you have to spend instead of just spending what you think you need. Don’t watch your profits dwindle. Call Venus Michael Account-Ability and speak to a certified Profit First professional today.