March 31, 2020

Profit First: 10/25 Allocations

Profit First Methodology
Ronald B. Allen

Can I make allocations more frequently or on different days then the 10th and 25th?

Yes. Profit First was
designed to be flexible; however, the 10/25 rule is a best practice. The
10th and the 25th are good dates because it achieves a semi-monthly rhythm of
accumulating money and then allocating it (the cash flow
wave.) Additionally, when bills are paid on the 10th and 25th they arrive
at vendors by the 15th and end of month, respectively.  This is when bills
are typically due.

For some
businesses a weekly rhythm is better, especially during the implementation
period. In that case, select a specific day of the week to be the business'
"money day." Allocate funds from the Income account to the allocation
accounts on this specified day each week.

Avoid doing the
allocation process "ad hoc" or more frequently than once a week. A
highly frequent rhythm or sporadic rhythm makes it difficult to observe the
cash flow waves in the business.

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