A key feature of the Profit First methodology is to set up multiple bank accounts. Accounts that do not need to have lots of deposits or withdrawals each month should be savings accounts that pay interest. Accounts with money moves routinely should be checking accounts. You need to set these up in such a way that you do not incur fees in either the checking or savings accounts. This is not always possible with every bank. Thus, you may need to visit several banks before you find one that 1) wants your business and 2) will not charge fees for setting up multiple accounts.
Remember that the Profit First methodology is a relatively new idea here in the Kansas City area and across the nation so your banker may not understand why in the world your business simply cannot get by with a single checking account and one savings account. Be patient, but firm. You need the accounts set up so that they fit the needs of your Profit First system. And, you will find a bank that is willing to comply with your request.
In fact, many Profit First readers report great success with their community banks, credit unions, and even some regional banks in the Kansas City area. They have found many banks that are willing to set up the multiple accounts needed for Profit First and not charge extra fees or set excessive balance requirements for doing so.
If your banker does not understand the Profit First process, don’t let that bother you or make you change your goal of setting up multiple checking or savings accounts. You can explain briefly that this method works for your business and that you would be pleased to give them a reference about how Profit First works.
Simply set up the multiple accounts that you need for Profit First. You will be using the 10/25 rule in Profit First in which pays bills and allocates funds on the 10th and 25th of each month. The operating expense account which is used for this purpose must be a checking account. The owner’s pay, profit, tax, and other accounts should all be savings accounts. Be sure that you will not be charged fees, even if a balance goes to zero at times.
Many banks insist on minimum balances. If this is the case with a bank, check out the next one. There are lots of community banks, savings and loans, and agreeable branches of regional banks in the Kansas City area.
If you still have questions or are interested in implementing Profit First in your business schedule a meeting with a Certified Profit First Professional today!