February 11, 2020

Convert Profit First Allocation Percentages

Profit First Methodology
Ronald B. Allen

In Profit First, we allocate for all expenses, including those incurred in foreign currencies. If your business requires offshore travel and other expenses, how do you convert the Profit First allocation percentages to other currencies? The answer is that you convert the foreign currency expenses to dollars and then to percentages. Because Profit First is a percentage-based system.

Perfect Profit First Target Allocation Percentages

When a business owner commits to using the Profit First method, he or she sets up multiple bank accounts to which money is allocated for various purposes. Depending on the business there may be five or more accounts. In order to manage cash flow and do effective budgeting, the business owner needs to decide on how much to allocate to each account. In Profit First, we use a percentage approach. Using total money available, percentages are assigned to profit, owner’s pay, tax, and all other accounts.

Because we do not always know how good sales will, how fast payments will arrive, or exactly how much money a foreign trip will eat up, allocations are set up as target percentages and then adjusted month by month. When we first allocate to a category, we use past data as a guide. But, a basic part of Profit First is controlling costs along the way to maximizing profit. Thus, the cost of foreign travel and associated expenses may start out as an educated guess and then evolve into a set target allocation percentage.

As with all things, practice makes perfect and with time your target allocation percentages will need less and less monthly adjustment.

Profit First Allocation Percentages and Budgeting

The most visible features of Profit First are the bank account balances that show us the state of our finances at glance. But, in practice, setting up allocation percentages to these accounts is budgeting. That is how Profit First works. You start by allocating a profit each and every tenth and twenty-fifth. You likewise allocate for taxes, owner’s pay, and the rest. But, with tools like QuickBooks custom reports, you will be able to spot problems and make adjustments to spending and staffing. This is how Profit First stops the steady expansion of work hours on projects and steady upward creep of expenses across the board. When you or someone in the business needs to travel offshore, you will try to get the best deals on airfare, hotels, car rental, and the rest. And, with experience, you will find the best deals and most efficient methods for accomplishing the task that took you to a foreign land.

And, when you have met the foreign client face to face, you can start using Skype for Meetings, and do all of your business from your office and spend a lot less money doing it!

If you still have questions or are interested in implementing Profit First in your business, visit our website, ExigoBusiness.com, or contact us at (816) 394-6818.

Click here to watch the YouTube video about how to convert Profit First allocation percentages to other currencies.

Real Revenue and How It Is Used

Profit First Methodology

Choosing Days Other Than the Tenth and the Twenty-Fifth to Allocate Funds

Profit First Methodology

Reserving High Percentages for the Tax Account Even When Taxes Are Already Taken Out

Profit First Methodology