Last week, I shared my honest review of Profit First, since implementing the Profit First Steps into my own business just over six months ago. If you haven’t listened yet, go back and listen to it because I share all about the percentage breakdown, how I set up my accounts, and how I use it to get an “at a glance” view of my business finances.
Today, I'm excited to share with you my detailed process of using Profit First accounting in my business each month. My system of doing it might be slightly different from what author Mike Michalowicz suggests in his book, and I’m also going to share a few extra things like my sales tracker in ClickUp. Essentially, I am going to take you on a deep dive of my process, sharing each step along the way.
And listen - before I go any further, please remember that I'm not a financial advisor, accountant, or bookkeeper. I'm simply sharing my experience with using the Profit First steps in my business in a way that I hope will be helpful to you. I like to use Profit First FOR me, as a way to get a better understanding of my business's financial health in a more high-level way instead of always referring to a detailed Profit and Loss statement or IRS statement from my bookkeeper.
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Before we dive in - are you in the Breakthrough Brand All Access Facebook Group yet? It’s free to join, and it’s where we take conversations like this one about business finances and go even deeper. Pop in and ask questions, share insights, and even peek behind the scenes of my own business and what I’m trying lately. It's a good time!
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I’m very vulnerably sharing the 8 steps I go through each month now, because I know some of you may think some of these steps are weird or way too much - but this episode is EXACTLY what I do each month. I do have a task in ClickUp reminding me to do this on the last day of the month (or close to it) but to be honest - I usually don’t need the reminder because I’m so EXCITED to do it.
I mentioned this in the last episode but again, this is different from bookkeeping/traditional accounting. In fact, what I see in my bank accounts as the income/revenue for the month is actually often going to be different than what my official bookkeeping books say because of money hitting accounts and leaving accounts at different times. But that’s okay for me! I don’t believe the effectiveness of the Profit First method needs to get everything down to the dollar. I have modified it in a way that works for me, that combines the Profit First accounts and percentages, my Profit sheet, and ClickUp (I have both a private space for me, and one I share with my team) to come up with a system that works for me!
Step 1: Screenshot My Bank Accounts Overview
First I take a screenshot of my bank accounts dashboard BEFORE moving the money around at the end of the month. So for example, if I was doing money movement for May, I’d screenshot my accounts overview on May 31st when my income account is more flush because I have literally all of the money from that month in it.
Some people move their money around multiple times a month but personally, while I DO like to check in more often (usually weekly), I like to move the money around just once consistently at the end of the month.
I start a new document in my own private hub in ClickUp, and that’s where I save these screenshots each month (each month gets its own document). So that’s the first step!
Step 2: Write Spending/Income Notes
Then, in that month’s ClickUp document, I put in notes from the month (basically anything I want to remember about how things went that month). Was it a good month? Did I have any sales or launches? Was it a low month? Did I make a big investment that month? The list goes on! I like to have a general notes section where I can jot everything down.
Here’s an example, in February, I went to a mastermind retreat in Florida and spent a lot on travel. I flew there and probably shouldn't have. I broke down exactly how much I spent because of flying and decided (based on the math) that next time here’s a list of what I would do differently.
Step 3: Complete My Sales Tracker in ClickUp + My Sales Goal Analysis
This doesn’t have anything to do with Profit First but it is a step I do monthly. SEPARATELY, in another part of ClickUp that my team can see, I also have a sales tracking setup with Zapier where every time I make a sale it goes into ClickUp and then I categorize it. I go into our sales tracker and categorize things a few times a month so it doesn’t build up. In there, I can quickly see how many different types of sales I made that month, where that person found me, what payment plan they did, etc.
Then, during my monthly Profit First steps, I do an analysis of my sales data. So for example, in May, my top referral for NEW sales was Google (with this podcast being a close second!). How fun that is to see?! And interestingly enough, sometimes I will see one month that paying in full was the most popular way people were buying from my templates. For Booked Out Designer, the 12 payment plan was the most popular. But that changes too!
Read More: How To Take Your Design Business From Burnt Out To Booked Out With Dream Clients
Aside from that, I make sure to set monthly sales goals for each of my products and keep track of them in the sales goal section of ClickUp. I update this area with the actual numbers to see if I have hit the mark or not and compare it to the prior month. As I do my updating, I add some sales notes, where I analyze the data, and see what clicked and what didn't. I also analyze my marketing efforts, such as how I presented myself on Instagram and the marketing tools I used.
Doing this helps me understand the trends in my business so that I can make the appropriate changes and predictions going forward. My team can see all this information, and we often discuss it in team meetings. Additionally, I create private notes just for myself in the ClickUp area to use as a reference next year or even the year after!
Step 4: Pick Your Profit First Percentages For The Month.
Although this deviates from what is recommended in the Profit First book, I've found that my percentage allocations have varied greatly every month within the 6 months I've implemented this system. While I do agree that it's important to determine your business' base numbers over time, I believe it's ok to slightly modify them based on the needs of the business that month and the next.
For instance, in March when I had a lower month, I allocated 50% of my earnings to expenses in order to boost that account, whereas in normal months I allocate 25-30% to expenses. Then, April was a big month for me, so I did: 20% to tax, 35% to owner's comp, 35% to expenses and 10% to profit.
Read More: How To Think Like A 7-Figure CEO With Rick Mulready
A Summary of Profit First Account Types
Just as a reminder, the Profit First system has five different accounts:
- Your income account is what ALL revenue goes into
- Your tax account holds the money you set aside for taxes
- Your owner’s comp account is money set aside to pay yourself
- Your expense account is just like it sounds, a place for all the money you spent to come out.
- Then finally, your profit account holds the money you choose to leave in your business for emergencies, larger investments, or yes - PROFIT. You can pay yourself a quarterly bonus from here too!
Step 5: Make Transfers
Once I decide on percentages for the month, it’s transfer time! I use a percentage calculator to calculate the amounts based on the total number in my income account. Then, I write it down in my private ClickUp document what went where (ie. I put 20% to taxes which was [insert the amount of money moved]).
After calculating it all, I add up the number and it should be just shy of the total in the income account! Basically, I then move ALL the money somewhere which leaves about $1-$2 in my income account (because I round the numbers).
Because I have all of my accounts with the same bank, internal transfers are instant. It’s fun to watch the account balances change in real time!
Step 6: I Take Additional Screenshots
Once everything is moved, I take another screenshot for my document to show what it looks like now “after money movement”. Sometimes I will have already paid myself from owner’s comp prior to money movement, in that case, I’ll note that in the note section. Otherwise, I’ll do a third screenshot of where all the accounts are after I pay myself again.
Step 7: Document in my Profit Sheet Spreadsheet How Much I Paid Myself That Month and Look at Totals Compared to Last Year.
I have my Profit Sheet embedded in ClickUp so I can have everything all in one place. One of the things I love about Clickup is the ability to embed sheets, so I don't have to open Google Drive to view and edit my Profit Sheet. From there, I'll look at how much I've paid myself month-to-date and over the quarter. This helps me understand how much I should pay myself this quarter and how it compares to the last quarter or the same quarter two years ago.
To keep my husband informed (because he keeps track of our “personal” books, I'll text him with the month-to-date amount I paid myself. Although my salary tends to be consistent, I may have fluctuations due to bonuses, big launches, or lower months (which would then come out of my owner’s comp accounts.
Step 8: Bookkeeper notes added and wrap up analysis all the way
While Step 7 technically wraps up my Profit First steps, later in the month once my bookkeeper gets me my financial numbers from the actual books being done, I add her notes to the document from that month too along with my official P&L (profit and loss statement) from the month so it’s all right there and easy to digest and reference over time! Like I said at the beginning - Profit First is less about getting everything to the dollar and more about getting a better overview of the financial health of your business regularly.
Read More: Ask My Bookkeeper Anything! Let’s Talk $$$ with Madison Brown
Are you ready to try these Profit First Steps?
I hope these past two episodes about Profit First help make finances a little more fun and introduce you to the concept of Profit First again. If you missed last week's episode, go back and listen to it now. That way, you can gain more clarity about what I just explained and get a deeper dive into the Profit First method. If you need help tracking your finances and predicting your income, make sure you also check out my Profit Sheet. It's a financial spreadsheet that I personally use in steps 7 and 8 of my process to keep track of my numbers (and honestly - it’s a game-changer!). Enjoy!
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Links Mentioned:
Buy The Profit First Book
Looking for a better way to know your numbers? Check out my profit sheet
Join my FREE Breakthrough Brand All Access Facebook Group
Shop the Elizabeth McCravy Website Templates
Check out Booked Out Designer
Sign Up for ClickUp to Start Tracking Your Finances
Connect with Elizabeth on her Instagram
June 27, 2023
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