Why Profit First Works…Really
If you’re like most people, you have a healthy dose of procrastination in you. You have a project you need to finish, maybe something you don’t want to do, and you put off getting it done until the very last minute.
Let’s say it’s your taxes. Maybe you’re not as organized with your paperwork as you need to be and you’re putting off digging for receipts and 1099s. You know you need to get this to your accountant by April 1 if you’re going to avoid filing an extension. So in the wee hours of March 31, you’re frantically searching your files–both physical and digital–to gather what you need.
Paying Taxes on the Profit First Model
One of the beautiful things about the Profit First model is always having enough in reserves to pay your taxes. But what happens when tax time rolls around and there’s simply not enough cash to pay all of the taxes?
Using Profit First in Your Personal Expenses
You know that Profit First works in your business bookkeeping. Pulling out your profit and owner’s pay from the start has helped ensure that you’re actually getting paid each month. (And thank goodness for that!)
But even though you’re pulling a regular paycheck, your personal finances are still a hot mess.
Revenue Streams or Trickles?
There is a lot of thought/opinion/advice when it comes to diversification and creating different revenue streams within a particular business model. The “don’t put your eggs all in one basket” theory. And it sounds good. If one “stream” starts to dry up, another one will help mitigate total disaster.
Here’s the rub. Too often in a business, I see “multiple streams of income” become “throw a bunch of stuff on the wall and hope some of it sticks”.
When it comes right down to it, how many Revenue Streams does it take to have a great business?
When Your Accountant Doesn’t Use Profit First
Accountants can sometimes get hung up on the principles of Profit First. They balk at the idea of taking profit first because they operate under the antiquated system of set a budget and stick with it.
Sure, it’s important to have a budget, but it doesn’t need to look like what accountants learned in accounting school. (Trust me, I know. I’m a trained accountant and Profit First bookkeeper.)
Here’s the thing though: Your accountant doesn’t actually have to be on board with you using Profit First. Because your accountant doesn’t actually balance your books for you and they aren’t creating your profit and loss statement or balance sheet–that’s your bookkeeper’s job.
Sometimes one person fills both these roles, but that’s not always ideal. (Though that’s a story for another blog post.)
Your accountant, on the other hand, is preparing your taxes based on what your bookkeeper provides. It shouldn’t matter to the accountant how you get there.
