
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'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 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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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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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 - simpleBut 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 ExRevenue 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