Have you started using the Profit First Cash Management System yet?
What are you waiting for?
For those of you not yet familiar with our Profit First Cash Management System (PFCMS), it gives you the opportunity of taking charge of your cash and profitability.
We use Profit First in our practice, and many of our clients use it as well. It works amazingly great… If you’re not yet using it, call us to get more info. It involves setting up several bank accounts where your revenue is apportioned into on a consistent basis in order to make certain that you have the right amount of cash, in the right place, at the right time.
When implementing Profit First, the question always comes up about what the initial allocation percentages should be. Getting this part right goes a long way in terms of having a successful experience using the Profit First Cash Management System.
When we implement Profit First we first do a thorough financial analysis of the business to make sure we understand their revenue and cost behaviors. We separate fixed and variable expenses because they need to be treated differently for the allocation percentages.
We also make sure that the Cost of Goods/Services Sold are properly displayed in the Income Statement because they are variable expenses and vary directly with the sales activity.
After this work is completed, we design the allocation percentages and test them to get them as close to reality as possible.
Once the Profit First Cash Management System is implemented, we carefully monitor the movement of cash to make sure the system is working properly. After a couple of months, we typically need to make a few adjustments and fine tune the system.
This whole thing might sound a bit trivial and simplistic, but believe us if you can, IT WORKS!! We use it both as a tactical cash management tool, and as a strategic management tool.
Call us when you’re ready to do this…