Profit First

Hi! 
Has anyone read the book Profit First yet? It advocates some kind of 'envelope' system for different categories of biz income and expenses. It suggests to have multiple bank accounts to make this happen, and I'm wondering if we could achieve something similar just using YNAB :-) 
Has anyone tried this yet?

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  • I haven't read the book, but regular YNAB use simulates using the envelope system.

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  • I just started setting Profit First up in YNAB - it's a natural fit. (And, it lets me close the "extra" accounts and have YNAB track it all for me.)

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  • I use the Profit First method with YNAB  and absolutely love it! 

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  • I'm using Profit First with YNAB for both my and my husband's businesses. He's had his tax business for years, but the money has always gotten intermixed with our personal money.  When he needed something for his business, e.g., software, folders, printer cartridges, it always came out of our personal account. I had it categorized in YNAB so we could track it, but it sure wasn't ideal. Starting this year, after reading Profit First, we got him set up with one business account and when he gets paid by a client, I go in and divvy up the money according to the percentages which I have recorded with the categories. Twice a month, he gets a paycheck which he's kind of struggling with, but I figure we can make it last all year, plus we won't have to pull from our personal money when it comes time to buy his software for next year! 😀

    As for the personal account, I decided to try looking at the percentages from our reports for last year, then plugging the numbers in accordingly. Unfortunately, we are carrying a lot of cc debt and it just wasn't working with that. Otherwise, it would be beautiful because I never could figure out how to divide up the money as it came in, especially without being buffered. I don't have much else to offer on that front, but I do like the idea. One thing that did come out of that experience was an amount for our personal fun money. It's not much, but my husband, myself, and our daughter all get a small amount each month. That goes into the budget right after the tithe, then all the other dollars get assigned jobs after that. So far, that part is working well. I just wish it could be a larger amount.

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  • I just got the book and learned about this recently via a facebook group of combining Ynab with Profit first.   Ynab is a very good cash-flow system.

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  • I found a video where Amber Dugger discusses combining Profit First & Ynab. She shows how she recommends that her clients set up YNAB to reflect Profit First concepts. It was very helpful for me to be able to see the actual set up in YNAB. https://vimeo.com/193605834

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  • Check this out! https://www.profitfirstprofessionals.com/2018/02/08/how-to-use-ynab-with-profit-first-ep-134-with-amber-dugger/

     

    This girl shows you how to use YNAB with the Profit First method. 

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  • I know it's a bit of a zombie thread, but I just began implementing Profit First this past month and I'm loving it's principles.  I'm still in the transition process and am apparently off somewhere in getting YNAB organized to complement PF.  I'll check out Amber Dugger's stuff...and see if that help get me organized...

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      • Sherri Goodall
      • Marketing Strategist
      • Purple_Network.4
      • 1 yr ago
      • Reported - view

      Slate Blue Hail Hi. I'm setting up my Profit First /YNAB accounts too. I don't think I have it done correctly. Any insights on what to do and not do?

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    • Purple Network I'd be happy to share my process, but I don't know if it's the best or easiest or most intuitive.  It's works for me though.  I don't think I could explain it clearly with just writing. It would need a demo I think. I'd like to say that I'd make a video demo, but I don't know that I have the time.

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      • Sherri Goodall
      • Marketing Strategist
      • Purple_Network.4
      • 1 yr ago
      • Reported - view

      Slate Blue Hail Ok. Well if you get time soon, I can send you a link to do a video chat. Or, if you want to do a screen recording with LOOM (Google Chrome plugin) video, that would be great too. You can send it to me here as an attachment. 

      Thanks for responding.

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    • Sherri Goodall Hi Sherri.  I'd be happy to do a video chat.  Feel free to email me offline and we can set something up Bailey (at) SFStutteringHelp (dot) com.  -Bailey

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  • Here’s another Profit First — YNAB video by Nick True: https://youtu.be/wXCrcat9Xoo

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  • I am considering how to use profit first with ynab. I watched Ambers video, (https://www.profitfirstprofessionals.com/2018/02/08/how-to-use-ynab-with-profit-first-ep-134-with-amber-dugger/) but seems to me she hasn't quite got it working right. She's got the profit first bit into ynab ok, but then the granularity of true expenses etc is missing.

    I can't quite get a handle on it, but I think it might be necessary to have a separate account for expenses. But maybe it just needs a separate category *group* for expenses.

    What she showed was, income came in, Profit First theory determined how it should be divvied between tax, profit, paying yourself, and expenses. So she did that, assigning it to categories of those names. Done and dusted.

    But the thing with expenses within Profit First, is that you have to limit your expenses to that magic percentage. The idea being there's only 40% or whatever that can be used for this, so make do.

    But once you have that eg., $440 allocated to "expenses" there's no easy way to feed it to fixed and true expenses. That I can see.

    If anyone using YNAB and profit first can enlighten how that next step is done, please do.

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      • Cirrus
      • Living mobile and solo
      • miriamnz
      • 11 mths ago
      • Reported - view

      Cirrus In this video by Nick True: https://youtu.be/wXCrcat9Xoo he keeps the multiple accounts as Profit First suggests. Well, mandates, actually.

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      • Cirrus
      • Living mobile and solo
      • miriamnz
      • 11 mths ago
      • 1
      • Reported - view

      Cirrus OK I found this post from Jesse, on using YNAB for YNAB. https://www.youneedabudget.com/moving-ynab-to-ynab/

      And this has the answer for Profit First, and its unexpected and nothing I've seen on any youtube videos.

      *Jesse uses Revenue categories.*

      Well, ynab doesn't actually  have such a thing. He has a group of categories he uses for revenue. Money comes in and goes directly into one or other of the revenue categories, it does not go into TBB.

      So, for Profit First, when money comes in you divvy it up by your magic formula into a 'Revenue' category for each kind of thing.

      Then, for expenses, you release the expense money into TBB/available, and budget it into your usual fixed, true, emergency, etc, expense categories.

      When its time to pay yourself, you release the Owner money into TBB/available, budget it into the correct payment category and then pay yourself.

      Brilliant! What we needed were *revenue categories* instead of multiple accounts. And a slightly cludgy process to release $ from the revenue category so it can be used.

      Sussed!

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  • Thinking about a small business for the future and am going to come back to this thread!

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  • A bit of an old post, I know, but I thought I'd share my experience combining YNAB and Profit First for my small business (just doing Year End, and it's been a breeze so far)

    Note: I use YNAB for my personal expenses, 1 Bank Account and lots of categories - simple

    But for my small business, I find that YNAB still allows you to "take" from accounts or categories where that money's been set aside (Rule 3 - Rolling with the Punches) - whereas Profit First dictates that you set that money aside (if looking at your Tax Account - that's the government's money!)

    So, I have my Profit First Bank Accounts set up: Revenue, Profit, Taxes, Salary, Op Ex

    Revenue comes in, and gets portioned out as per PF percentages (and listening to my accountant for how much to set aside for taxes)

    Then, I link YNAB to just the Op Ex account.  It's not perfect and I have some work still to do (all my legal and accounting fees come due at roughly the same time each year, and I need to better plan for this True Expense), but by allowing the daily transactions to go through YNAB, but keep the bigger picture items just allocated through Profit First, so far it seems to be using each system to their best advantages
     

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