Do you even know if you have enough Working Capital?

For small businesses, managing working capital—the cash required for daily operations—is crucial to implementing this system effectively.

Our Profit First Cash Management System (PFCMS) revolutionizes cash management by prioritizing profit over expenses. 

PFCMS starts with disciplined cash allocation. Revenue is moved into different accounts for Profit, Owner’s Pay, Taxes, and Operating Expenses, giving a clear view of what’s available to run the business. This structure enforces spending discipline and avoids overspending.

Start by building your vault

Working capital shortfalls can still arise due to seasonal fluctuations, growth, or unexpected expenses. While borrowing is discouraged for routine operations. PFCMS can be an important strategic tool when used to manage this.

One key goal of PFCMS is to build reserves, such as a profit vault for special initiatives, large orders, or slow months. Additionally, a DRIP account allows you to set aside money during peak seasons to cover expenses during slower periods, reducing the need for financing.

Borrowing should be a last resort

Borrowing should always be a last resort and paired with a repayment plan. We have seen many businesses get into the debt trap by borrowing for short term needs, but ending up spiraling downwards with long term repayments that hamper the business.  Sometimes it is better to grow slowly and naturally than to use debt.

A short-term line of credit (see our earlier article on this) can bridge timing gaps in receivables if promptly repaid, but systemic cash flow issues signal deeper problems requiring attention.

The best solution lies in optimizing your working capital cycle. Tighten customer payment terms, negotiate better supplier terms, and eliminate unnecessary expenses. Profit First reinforces this discipline, ensuring you don’t rely on future revenue to cover today’s costs.

Balancing Financing with PFCMS Principles
If borrowing is necessary, stay aligned with Profit First:

• Use operating expense funds for loan repayments, not your profit account.
• Plan financing costs in your budget to avoid surprises.
• Borrow only what’s essential for short-term needs.

By sticking to these principles, you can manage working capital sustainably, using tools like credit lines or invoice factoring without compromising profitability. Profit First transforms working capital from a stress point into a growth tool.