Profit First FAQ

Gain the answers to the most frequently asked Profit First questions.

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Profit First Frequently Asked Questions

Reserving High Percentages for the Tax Account?
Profit First has all sorts of ways to make you feel good about your job, your business, and the way forward, like getting reimbursed for your taxes.
What Businesses Need to Use Real Revenue
Get your financial house in order with Profit First and the Real Revenue concept for businesses with subcontractors and material costs.
Why Owner’s Pay, Profit, and Tax Accounts Can’t Be One Account?
Owner’s pay, profit, and taxes need to always be in separate accounts to allow for a clearer view of monthly cash flow.
How Do I manage Deposits from Total Income?
When you use the real revenue approach because of materials and subcontractors, you need two new bank accounts in order to correctly make allocations.
Real Revenue and How It Is Used?
Real revenue is a bookkeeping category used in businesses that have subcontractor and materials expenses. It gives the owner a clearer picture of the size and shape of his business.
Can I allocate more frequently or on different days than the 10th and the 25th of the month?
Profit First bank allocations are best done on the tenth and twenty-fifth for efficiency and to gain insight into your finances.
Why should I Allocate Money from the Income Account to Multiple Accounts?
Develop the habit of allocating money to Profit First accounts on the tenth and twenty-fifth for greater efficiency and business insight.
How to Adjust Profit First Allocation to other Currencies?
For setting up allocation for expenses in foreign currencies, to dollars and then to percentages. Because Profit First is a percentage-based system.
How to Be Profitable Even While Trying to Pay off Debt?
You need to be making a profit in order to pay off your debts, so start Profit First and use their method of debt repayment, paying the smallest debt first.
Should Profit First be done retroactively?
Since Profit First is a forward-looking process, you will totally rework how you do your banking in order to improve budgeting and cash flow management.
Why Profit First Moves Money Twice?
Because Profit First understands human nature is why profit first moves money twice and addresses the negative effects on your business of Parkinson’s Law.
Will it problematic Paying Vendors Doing Allocations?
If you want to maintain good business relationships you need to pay your vendors on time. Does it work when paying on the 10th and 25th?
I have to pay sales tax, which account does that come from?
When you collect sales tax on sales made, you are acting as an agent of the government. You need to set aside that money in your Profit First sales tax account.
Is a Tax Account Still Necessary with an S-Corp?
Here is some useful information about small business corporations (S-corps) and how taxes are allocated in the Profit First method.
Why Still Need an Owner’s Account Even You Take Your Pay in Distributions?
Many small business owners take distributions on a monthly or even quarterly basis. So, why have a profit or owner’s pay account?
How to Determine Employees and Contractors?
You need to determine whether someone is an employee or a subcontractor in order to calculate your real revenue and understand the true size of your business.
Why Running Up Expenses to Pay Less Taxes Doesn’t Work?
You know that business expenses are deductible from your income. So, aren’t they a good way to reduce how much you pay in Federal, State, and Local taxes? Find out why that theory only hurts your business.
Why is the tax allocation at 15%? Doesn't that feel kind of high?
The reasoning behind the 15% tax allocation in the Profit First method is to have enough money available for both business and personal taxes. See how it works.
Is Real Revenue and Gross Profit the same thing?
At Exigo Business Solutions we use Profit First for our clients so they get the best understanding of their business and this includes the difference between Gross Profit and Real Revenue.
The Difference Between Total Income and Real Revenue?
It is important for a business owner to accurately know the size of his business. Real Revenue is a calculation which does just that. Find out the difference between Total Income and Real Revenue.
The Difference between the Basic and Advanced Method of Profit First
This system needs to be set up to work best for your business. And the process of setting up Profit First accounts needs to be something that you can handle. Learn the difference between basic and advanced.
When Using Profit First Where Do I Pull Money From?
A frequent question from new Profit First users is just where to pull the money from when there is not enough in your operating account. Learn how to make sure your Operating Expense account is enough.
What Debts Should Be Paid Off First?
How do you deal with debts in a small business? A question that is frequently asked by new Profit First users is this, what debts should be paid off first? Here's the answer!
When should I start using the Profit First Management System?
The transition from your current “bank balance” method of bookkeeping to the Profit First approach is not difficult. And with a Profit First Professional at your side, implement Profit First now.
Can I use Profit First in my Personal Finances?
The same Profit First principles that help you budget and manage cash flow in your small business work equally well at home.
How do I pay multiple forms of loans and debt?
When paying off multiple debts, stay with the Profit First approach and always allocate money to profit. Delegate your money to certain loans in order to get them paid off quicker while still making a profit in your business.
Which Profit First accounts should be checking and savings?
It is important to know which accounts to set up at your bank in order to correctly apply the Profit First method to your small business.
Is Profit First Really Worth It?
The additional time required to reconcile accounts in the Profit First Methodology is negligible. In fact, in many ways, this approach is more efficient than using one bank account.
Which Banks Are Best for Profit First?
Picking the right bank is necessary in order to institute a true Profit First system.

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Exigo Business Solutions is a Certified Profit First Mastery Level consultant