Get Your Butt to the Bank (Part 1) – Ep 2 Blog Post
[Adapted from Episode 2 of the Profit First Nation podcast]
So maybe you’ve just learned about Profit First and are wondering, “what is the first step I should take in order to implement this incredible money-management system for my own business?”
Hopefully, if you’re here you’re already somewhat familiar with the Profit First philosophy. You may also know that there are seven total foundational accounts that are associated with Profit First. In this post, we will outline the first of three steps you must take to successfully set up Profit First. But you must understand that all seven foundational accounts are critically important to you as you continue your journey toward permanent profitability.
STEP 1: GET YOUR BUTT TO THE BANK
The very first step you must take when adopting Profit First is to get your butt to the bank to set up your first five foundational accounts. Do not, under any circumstances, skip this first step! Even if you only use a few of the accounts at first, you will eventually need all of them to make effective use of the Profit First method. And when you set up all seven of the foundational accounts from the get-go they will be there, ready to work for you when you’re ready for them. Here are the first five foundational accounts.
1. Your INCOME ACCOUNT
2. Your PROFIT ACCOUNT
3. Your OWNER’S PAY ACCOUNT (or OWNER’S COMPENSATION/OWNER’S COMP)
4. Your TAX ACCOUNT
5. Your OPERATING EXPENSES (or OPEX ACCOUNT)
It’s likely that you already have at least one account setup to receive ACH payments from your customers. Great news – you can designate that account as your INCOME ACCOUNT! Now, you only have to open four new accounts.
And contrary to what you may think, it is generally quite simple to set up these additional accounts with your current bank. Often a short email request will suffice. Something like:
A simple request associated with our account ending in <XXXX>.
We have some exciting things happening with our company, <Company Name>.
To prepare for our future, we are implementing a new cash management system called Profit First.
We kindly are requesting to open four additional checking accounts with online access.
We do not require checks or ATM/Debit cards for these accounts at this time.
Ideally, we would prefer to have the new account signature cards sent to our office, or via email for signature.
Your Direct Line
Chances are that when your banker receives your email, you’ll have just made their week. Bankers often receive bonuses for opening new accounts – even for existing account holders. But if your bank attempts to charge you any type of fee for opening these accounts, you walk. Since almost every bank offers free checking with a minimum balance requirement, there is no need for you to allow any bank to profit from fees at your expense (pun intended).
There may also be a scenario in which your bank asks about Profit First or even doubts the effectiveness of your new system. You don’t need to justify your decision to your bank, but if you’d like to answer their question in a constructive way you could advise them to Google Profit First (where they’ll see an abundance of 5-star reviews on Amazon) and explain to them that Profit First that it is a proven system that you believe in and are ready to implement.
Ultimately, your banker (and your accountant/bookkeeper) is a vendor to you. And if they aren’t willing to support you on your journey toward permanent profitability, then you may want to consider moving on to someone new.
Okay, so that’s step one: you gotta get your butt to the bank and set up the first five foundational accounts. If you run into any issues with your current bank, you can find a list of alternative, Profit First-friendly banks in your area here.
Check out Get Your Butt to the Bank – Part 2 for an explanation of the second and third steps in implementing Profit First.
Podcast, Profit, Taxes,