The “Profit First” Method for Small Businesses
Struggling with cash flow? The ‘Profit First’ method flips traditional budgeting—pay yourself first, then cover expenses. Most businesses follow the traditional formula: Revenue – Expenses = Profit. But the Profit First method, created by Mike Michalowicz, suggests flipping the equation: Revenue – Profit = Expenses. By allocating profit first, businesses ensure they stay financially stable instead of hoping there’s money left over.
How to Apply Profit First in QuickBooks:
- Set Up Multiple Bank Accounts: Use separate accounts for Profit, Owner’s Pay, Taxes, and Operating Expenses.
- Automate Transfers: Schedule QuickBooks to allocate a percentage of income to profit first.
- Track Cash Flow: Run a Cash Flow Report in QuickBooks to see how your money is distributed.
Need help structuring your finances? A Chandler CPA, like AZ Easy CPA, can guide you in implementing this method effectively!
P.S. Need help with your business finances? Contact Us! We offer monthly accounting and bookkeeping services, clean-up projects for past years, QuickBooks training, and phone consultations to help you stay on track.
