5 Profit First accounts - What are they?

An Introduction to the 5 Profit First Accounts

In Profit First, author Mike Michalowicz lays out a simple but effective system for small business owners to ensure that they are always profitable. The key to the Profit First system is dividing up your revenue into the 5 Profit First account, that is 5 different bank accounts, each with a specific purpose.

In this blog post, we'll introduce you to the 5 Profit First accounts and explain what each one is for.

1. The Operating Expenses Account: 

This account is for all of your business's day-to-day operating expenses, such as rent, utilities, insurance, and software. This account is typically a current account.

2. The Owner's Compensation (also known as Owner's Pay) Account: 

This account is for your take home as the owner of the business. The mechanism to pay yourself this will depend on whether you are a sole trader or limited company, as well as your tax position.  This account is typically a savings account.

3. The Tax Account: 

This account is for setting money aside to pay the business taxes.  This account is typically a savings account.

4. The Profit Account: 

This account is for distributing profit to the owners of the business.  This account is typically a savings account.

5. The Income Account: 

This account is where the income is deposited prior to it being distributed to the other bank accounts.  This account is typically a current account

The Profit First system is a great way to ensure that your small business is always profitable. By dividing your revenue into different accounts, each with a specific purpose, you can keep track of where your money is going and make sure that you're always putting profit first. Make sure you set up those 5 Profit First bank accounts! 

And perhaps you are curious which banks are best for Profit First in the UK - then here is the answer

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