Did you know that your bank probably offers savings accounts for businesses? Maybe not, but to be honest, the bankers themselves probably don’t know it’s offered. It’s rare for a business to open a checking and a savings account, let alone the multiple accounts the Profit First system requires.
When I was adopting the Profit First system, I had to specifically request that my bank put the income I was getting from my clients into my business savings account. The banker was caught off-guard because she was assuming that I was putting it into my checking. The banker didn’t even think to put it in savings until I said something.
How many of you only have one checking account for your business that all the collection goes to? How many of you budget based on what’s in that one account? Opening multiple accounts, checking and savings, allows you to budget based on specific needs. Under the Profit First system, our dental clients have separate accounts for operating expenses and payroll, and a savings account dedicated to future taxes and profit. This allows us to do a few things: the owner is always able to pay himself, and the operating budget is entirely based in one account that is only allocated the portion of collection income that is for operations, so we know what’s truly available and that budget doesn’t include payroll.
Consider opening multiple accounts at a bank and handle your business finances like you would personal finances: by saving money for your year-end taxes and your profit. By allocating only a portion of your collection income to operations you will be more likely to keep expenses down since the funds are easier to track.