1What is the Profit First method?
The Profit First method is the system that can help you grow your business and achieve long-term success. Basically, you deduct the profit from the revenue first, and then you cover taxes, your pay, and other operating costs.
2Does Profit First work?
Profit First works because it changes your mindset and teaches you about your finances. Profit is the priority and not a “leftover” after covering expenses, meaning you’ll budget your expenses more carefully.
3Is Profit First really worth the effort?
Using the Profit First method is definitely worth the effort if you want to increase your profits and manage your finances better.
4When should I implement Profit First?
You should implement this system in the early stages of your business because you’ll change your perspective on profits and expenses, which will allow you to make better business decisions.
5What are the 5 Profit First accounts?
The 5 Profit First accounts are:
- Total income account – depositing the income
- Profit account – accumulating profit
- Tax account – tax payments
- Owner’s pay account – your salary
- Operating costs account – covering operating expenses
6Will Profit First work for my business?
Profit First method is designed to work for any type of business, no matter what your industry is.
7Which Profit First accounts should be access accounts, and which ones should be savings accounts?
Accounts used for profits, tax, and owner’s pay should be savings accounts, while the accounts for revenue and operating expenses should be transactional accounts that you can access at any time.
8What does “real revenue” mean?
Real revenue is the “real money” your business makes. It’s the total revenue minus expenses of materials and subcontractors used to create the product or deliver the service you offer.
9What is the difference between “total income” and “real revenue”?
Total income represents all cumulative sales, while real revenue is the amount you get after subtracting the cost of materials and subcontractors. You should use the real revenue for the Profit First method if a substantial part of your services or products (more than 20%) is provided through subcontractors.
10My business requires that I run Profit First based on my real revenue. How do I manage the deposits from total income?
You have two options in this case depending on how predictable your materials and subcontract costs are. Option 1, is to open another bank account for materials and subcontractors and transfer the appropriate amount to this account as part of your distributions. Option 2, is to pay for your materials and subcontractors out of the income account before you make your other distributions.
11My business has debt, which I first have to pay off before I can make a profit. Will Profit First help me?
You cannot pay down debt until you have a profitable company. The Profit First method will help you become profitable so that you can pay off debt. You should cover the necessary minimum debt payments with the operating costs account. When it comes time to distribute your profit, if you are in debt, we recommend you take a little for yourself (1-2% of the profit) and use the majority to pay down your business and personal debt until it is gone.
12Can I implement the Profit First system before my business is profitable?
Yes, and it’s even advisable to apply this method in the early stages of your business development because it forces you to budget your expenses more carefully so your business can become profitable.
13How can Royer Accounting help me grow my business?
Royer Accounting will help you grow your business by keeping control of your financial health and setting up the Profit First system. We are there to guide you along the way and help you get there faster than you could on your own.
14How much do you charge?
We need to know our clients’ needs and problems so we could come up with solutions and determine the price point. Feel free to contact us or schedule a consultation so we can start the conversation about your business.
15Can Royer Accounting help me to set up the Profit First system and teach me how to work with it?
Yes, Royer Accounting will teach you how the Profit First system works and help you set up multiple accounts used to manage your finances better.