Profit First is a new approach to savings that’s changing the lives of people worldwide. NorthOne’s sub-accounts make following the book’s advice simple.
Across the internet, Mike Michalowicz‘s Profit First has been winning praise from accountants, small business owners, and the financial independence community for reframing ideas about budgeting and cash flow. Through impactful storytelling and practical advice, Michalowicz has helped hundreds of readers take control of their finances. Reviews call the book “a brilliant smack-upside-the-head revelation for entrepreneurs” and “arguably one of the greatest [financial] hacks of all time.”
If you’re looking to implement the tactics from Profit First into your own business, NorthOne can help. Our sub-account feature basically does the work for you.
Okay: so what exactly is Profit First about anyway?
The core idea behind Profit First is flipping the script on how we typically think about accounting and budgets. Traditionally people think about their cashflow like this:
Sales – Expenses = Profit.
The Profit First formula puts…well, it puts the profit first. This equation looks like this.
Sales – Profit = Expenses.
From the start, you’re accounting for your profit, taxes, and pay. What’s leftover is the budget your company has to spend on things like rent, salaries, material costs, and utilities. It can be a bit to wrap your head around. But putting profit first makes you more conscious of where and how you’re spending money. That shift in mentality can be a game-changer for actually paying yourself.
Cool. But how does Profit First work?
Basically, you take your profit out of the cash deposits before expenses rather than paying yourself with what’s leftover. The system involves transferring predetermined percentages of your cash deposits into various bank accounts to cover profits, taxes, operating costs, owner’s payments, and revenue.
How much you put into each account is determined by Target Allocation Percentages (TAP). You can read more about how you should determine your TAP — including a helpful formula based on your state’s taxes — here.
NorthOne’s sub-accounts feature makes the Profit First model easy to implement under one business bank account.
Alright. Tell me about your sub-accounts feature.
NorthOne Business Banking account lets you create free sub-accounts to segment your money. You can create sub-accounts in a few quick clicks and automate what percentage of each payment goes where. Folks following along with Profit First have already noticed how useful this feature is for their new journey.
Find out all of the details behind sub-accounts here. And you can open up a NorthOne account here. Making big changes towards your personal accounting — and making real steps forward — doesn’t have to be complicated. We’re happy to help you get started.
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