A Profit First Myth -Spreadsheets

There are a lot of myths around Profit First. Some folks like to say you don’t need the five foundational accounts, that no bank will open such accounts, that no accountant will get on board, that you can manage your business using traditional accounting, or that spreadsheets are all you need.

I’m not here to hurt your feelings, but you’re doing it wrong (pan to Michael Keaton in the drop off line in Mr. Mom).

During the course of this pandemic, countless business owners have told me that if not for implementing Profit First, their businesses would never have survived. The system is easy, and can sustain your business. Folks have told me they had no cash flow for months, or had family members who were ill, and their businesses are still profitable; they are still here.

Circumstances are going to arise, and the best way to prepare your business is by using Profit First. When I see what critics are writing, one of the biggest myths they pontificate is that you can do Profit First by simply using a spreadsheet.

Profit First is a habit. “If you always do what you’ve always done, you’ll always get what you always got.” – Henry Ford

Let’s debunk the spreadsheet myth for good, because when your spreadsheet fails, and it will, it’s because Profit First is more than a spreadsheet. Profit First is a habit. If you follow the system beyond setting up accounts, you will see that the financial habitual behaviors that you have cycled through over and over in the past that have gotten you, you guessed it, the same results, over and over again.

When you understand the behavior intercepts and how they work in your business, you will have a whole new appreciation for what Profit First will do for you.

Profit First is a cash management tool that works with our natural behavior. You constantly check your bank accounts, right? With Profit First, you pre allocate money for its intended use. So now when you log into your bank account, you clearly see what the money’s use is specifically for.

For years business owners were told not to log into our bank accounts, to check income statements, log into your accounting system, reconcile income statements and balance sheets. You want to stay up to date with your fluctuating operating cash ratio, your inventory return, you name it. If you consistently do these things, you will manage your business well. It’s true.

But.

Do you do all of these things on a daily basis? It’s just not realistic.

The key is not to change you or your behavior, but where you channel those behaviors. Start with opening your Profit First accounts at your bank. Check out these first steps. And don’t be intimidated. Banks and accountants are catching on too.

Here’s to your good habits! And here’s to your profit!

-Mike

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