Are you a business owner who wants to take control of your finances? When implementing the Profit First method, you can start taking a cash profit from day one.
Profit First is a proven system for managing cash flow in your business. It leverages your habits and behaviours to your advantage without needing to learn complex accounting concepts and jargon. Pay yourself a market salary, take an actual cash profit, and know exactly where your cash is and what it’s for.
Book a session with Gail to find out how Profit First implementation can deliver results in your business.
WHAT IS THE PROFIT FIRST METHOD?
Profit First flips the traditional way businesses handle money. Instead of waiting to see what's left after expenses, you prioritise profit.
This revolutionary cash management system for business owners allocates a portion of income directly into profit accounts, shifting focus from reactive spending to proactive profit planning.
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HOW DOES PROFIT FIRST BOOKKEEPING WORK?
The Profit First accounting system encourages setting up separate bank accounts for specific purposes, commonly:
Income: A general-purpose account where all business revenue is deposited
Taxes: Set aside funds to pay yours and the business future tax payments.
Owner's pay: Money deposited in this account is specifically for paying your wages.
Operating expenses: To cover regular business costs like rent, supplies, etc.
Profit: Regularly allocate funds from the Income account to the profit account. This is paid to you on a quarterly basis as your reward for owning the business.
Decide what percentage of your income goes into each account and set up automatic transfers as soon as you receive income. This will remove the temptation to spend it elsewhere and ensure consistent savings.
BENEFITS OF PROFIT FIRST ACCOUNTING
Increased Profitability: Ensures profit isn't an afterthought but a priority.
Improved Cash Flow Management: Predictable allocation avoids overspending, allowing for better budgeting for GST, payroll and annual expenses.
Reduced Financial Stress: Peace of mind knowing taxes and owner's compensation are covered.
Enhanced Business Growth: Set up bank accounts to save for new employees, deposits for assets and investment opportunities.
The Profit First method is a good fit for most businesses, especially those struggling with inconsistent profitability or poor financial habits. However, it is not a one-size-fits-all solution. At Pulse Accountants, we can help you customise Profit First to suit your business.
WHY WORK WITH PULSE ACCOUNTANTS
As certified Profit First accountants, our team has extensive knowledge of the system and its application within the New Zealand business landscape. Our online accountants guide you every step of the way, from setup to optimisation, with a personalised approach that matches your business goals while considering your specific tax implications and personal needs.
With expert guidance for seamless implementation and ongoing support, transitioning to the Profit First method has never been easier. Contact our accountants in Napier today!
FREQUENTLY ASKED QUESTIONS ABOUT THE PROFIT FIRST METHOD
What if I don"t have enough profit to start?
Profit First is designed to work even with small businesses or those just starting. The key is to begin building the habit of prioritising profit, no matter the amount.
Start by allocating a small percentage to your profit account. Even 1-5% adds up over time. As your business grows and becomes more profitable, gradually increase the percentage allocated to profit.
Seeing your profit account accumulate, even slowly, can motivate and reinforce the positive impact of Profit First bookkeeping.
What percentages should I allocate to each account?
The ideal percentages depend on your business and financial situation. We start where you are at and make incremental improvements each quarter. If you have never taken cash profit from your business, we start with 1% to your Profit account and base the remaining expenses on the outcome of your Profit First Assessment.
Can I still use Profit First if I have debt?
Absolutely! Profit First is a powerful tool incorporating debt repayment strategies. Ensure you are making the minimum debt repayments to avoid late fees from your Opex account and destroy debt faster with quarterly lump sum payments from your Profit savings account. As your profit grows, you can use it to accelerate debt repayment while maintaining financial security.
