Great question! Profit First allocations using our Profit First Cash Management System (PFCMS) are typically made twice a month, on the 10th and 25th. This schedule helps ensure that you have a regular rhythm of cash flow management without overwhelming your bookkeeping process.
Here’s a more detailed breakdown:
- 10th of the Month: Make your allocations after your revenue has settled from the first part of the month. This allows time for most of your clients’ payments to come in and gives you a clear picture of your cash position.
- 25th of the Month: This allocation is made before the end-of-month expenses hit. It helps ensure that you’re setting aside profit, taxes, and owner’s compensation before you’re tempted to spend that money elsewhere.
If you have a bi-weekly payroll cycle then running your allocations on the day that you prepare payroll is also a good practice.
If you find that your cash flow is more irregular or you have a high volume of transactions, you might consider making weekly allocations to stay on top of things – pick a day, and stick to it (such as Monday morning). But we don’t recommend doing allocations more frequently than once a week!
If you run into a temporary spot where cash is getting thin in one of your PFCMS accounts, you can go ahead and do an intermittent allocation. But be warned that you might be robbing Peter to pay Paul (or Mario, in our case). In other words, if you find yourself doing the intermittent allocations often, that might mean you need to either adjust your allocation percentages, or your spending is out of alignment.
If you’re new to our PFCMS and want to find out how you can guarantee your profitability, give us a call…
