What Profit First Rhythm Works Best?
Profit First revolves around rhythms. Behavior and habit go hand in hand. We need to create solid rhythms in our business to reinforce our behaviors. That's why Profit First developed the 10/25 rule.
What is the 10/25 rule? It simply means allocating your funds and paying your bills on the 10th and 25th of the month.
On the 10th & 25th of the month you log into your bank account and move funds from your income account to the other accounts. You'll also use this time to pay any outstanding invoices. This allows you to see cash flow in your business.
So that brings a question; can I make allocations on different days?
Yes. Profit First was designed to be flexible. I personally use a weekly rhythm. Every Friday I log into my bank and make my transfers from the income account to the other accounts.
Some businesses like to do it on the day they run payroll
I wouldn't recommend doing the allocation process more frequently than once a week or ad hoc. A highly frequent rhythm or sporadic rhythm makes it difficult to observe the cash flow waves in and out of the income account.
The key is pinpointing a solid rhythm that YOU will stick to. We're using this system to reinforce our existing behaviors. What rhythm makes the most sense to you and your business?
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Craig is a Certified Profit First Professional in Austin, TX who is passionate about helping service based businesses become permanently profitable.