Most business owners I know typically have one bank account. And if they have more than one, it’s usually a savings account. One of the core elements of implementing Profit First is using multiple bank accounts — at least five — which can be a hard concept for people to grasp.

Profit First is a cash management solution that improves your business’s financial health by putting profit first. It’s also a best-selling book written by Mike Michalowicz, an entrepreneur behind three multimillion-dollar companies and a former small business columnist for The Wall Street Journal.

Mike trains and coaches accountants and bookkeepers worldwide in Profit First’s concepts and strategies to implement the approach in their clients’ businesses. I became a Profit First Professional (a.k.a. a Profit First coach) in 2019.

Why Profit Matters

Mike and I believe that a profitable business is a stable business. One key to profitability is to manage your business’ cash flow more effectively. With Profit First, this means using five business bank accounts: Income, Profit, Owner’s Compensation, Tax and Operating Expenses. And it’s essential to get these accounts set up all at once and at the beginning of the Profit First journey. That way, you start adopting the profit-first mindset sooner vs. later!

Setting up five bank accounts is one of the tougher tasks my coaching clients face implementing Profit First. For one thing, it takes time and there are usually many other tasks pulling them away from calling their bank! But it’s important to talk with a bank representative ASAP and get the accounts set up, so you can focus on other aspects of Profit First. (Learn more about my Profit First coaching.)

Contact Your Bank About the Profit First Accounts

If you already like the bank you work with today, it makes sense to seek their help first. You can get the conversation started with an email to your bank manager, in advance, letting them know you’re going to be coming in to set up additional accounts.

The email to your banker could be short and sweet. (Note: You probably only need to ask for four accounts, and I’ll explain why shortly.)

Hi, <banker name>. I have a request associated with my account ending <XXXXX>.

We have some exciting things happening here at <Insert Company Name>. To prepare for our future, we are implementing a new cash management system called Profit First, which you may have already heard of.

We want to open four additional checking accounts with online access. We do not require checks or ATM/debit cards for the accounts at this time.

Could you have the paperwork ready for me to sign by next Monday?

Thank you!

<Add your name, title, company, mobile number and email address>

Simple and direct, right?

Work with a Profit First-Friendly Bank

If the bank you work with is resistant to setting up multiple accounts, shop around. There are Profit First-friendly banks across the US who would be more than happy to have your business. (I have a list of Profit First-friendly banks, and many of them will work with you 100% online. Email me if you’d like the information.)

The reason I said you only need four new accounts, not five, is because you can keep your existing account. Is it the account you use to receive ACH payments from customers? If yes, then designate it as your Income account because this is where all your deposits will accumulate.

If this is also the account you use to make automatic payments, then definitely make it the Income account. This will bring to your attention the money that regularly flows out of your business, including long-forgotten charges — for example, subscriptions you no longer need, automatic payments for a resource your business no longer relies on, etc. (If I had a dollar for every time a business owner said to me, “Oops. I forgot I was still paying for that!” …)

By using five bank accounts, you see right away how much money you've allocated for each account — including what you earmarked for profit.

Be Intentional About the Money You Spend

The key with Profit First is that you want your spending to be intentional, making sure your expenses aren’t robbing you of your business’ profitability.

Profit First is a system that works with our natural behavioral paths. Many entrepreneurs and business owners do what’s called bank-balanced accounting. They log into their bank account, see how much money is available at the bank, and then spend accordingly.

The power of having five Profit First accounts is that you get clarity each time you log into your bank accounts. You see right away how much money you’ve allocated for each account — including what you earmarked for profit.

Your banker may not understand the power of this paradigm-shifting system, and that’s okay. It’s not your job to convince them about Profit First’s effectiveness unless your bank representative genuinely wants to know about it.

How Much Money Goes into Each Profit First Account?

Profit First coach Jennifer AllenThe process of determining the account allocations is something I help my coaching clients figure out. (You can find general allocation guidelines in the Profit First book.)

Allocating money to separate bank accounts is something I recommend you do twice a month. It’s an easy habit to get into, believe it or not, and one that’s similar to what your parents or grandparents did, where they used separate envelopes to stash money for groceries, their house payment, for charitable donations and for special occasions.

When your business follows the Profit First methodology and its separate bank accounts, you’ll see what money is available for what purpose before you spend it. That’s because the money is carved up into the different accounts, and the monies’ intended uses are pre-determined for you. This controls your spending accordingly, and that’s a beautiful, powerful thing!

Reconciling each of the additional accounts can be completed in just minutes each month, depending on your business’s size. Doing allocations twice per month, you will have an increase of (by my best guess-timate) four to eight transactions per month with each new account. You’ll make these transfers online, which makes the process extra simple.

Relax, You’re in Good Company!

Jennifer Allen is a Profit First Professional

I’m Jennifer Allen, a Frederick, MD-based Profit First Professional who helps business owners implement Profit First.

Taking the first step of your Profit First journey and talking with your bank may feel intimidating. But there are more than 350,000 businesses across the globe who rely on Profit First’s concepts, so you’ll be in good company! They jumped on the five-accounts bandwagon, and you can, too — if you let no obstacle or excuse get in your way.

If you’re a self-directed person, read the Profit First book and bring its methodology into your business. If you’d prefer to work with Profit First coach, set up a complimentary call with me. I’ll explain how we will work together, one-on-one or in a group setting with other business owners, and you can ask any questions.

After we talk, it’ll be your call about how to move forward. It’s your business — not your bank’s, not mine — and you own your company’s financial practices and the decisions you make about cash flow, what to charge for your goods and services, what to buy and more.

My background is accounting, and my mission is to help individuals, families and business owners kick bad money practices and worries to the curb. Through Profit First, I help business owners transform their money-management practices, making sure they pay themselves regularly, make a profit and remove as much as possible of the money-related stress from running a business. (It can be very tough at times, I know!)

If money matters are keeping you up at night, what can I help you with? Let’s get started.

Thank you to the Mike Michalowicz and Danielle Mulvey with the Profit First Nation podcast, Get Your Butt to the Bank, for inspiring this article and providing the banker email outreach template!