There have been some questions of FB about the need for a separate bank for tax and profit accounts. The flow chart i posted before is an exact representation of the Profit First model as recommended by the author. You can, however, tweak it however you want. Below is a version that excludes the second bank and off-site accounts in favor of just one bank with sub-accounts.
this would in theory accomplish the same thing. just remember- the Profit First method is every bit as much about leveraging basic human behavior and habits (something common GAAP accounting methods totally ignore) to make your money do what you want it to, as it is about just moving money around and keeping organized.
there's a very specific reason that two separate off-site bank accounts are recommended, and it has nothing to do with accounting. here's a direct quote from the book that sums it up better than I can:
Author and historian C. Northcote Parkinson theorized that our demand for a resource increases to meet
the supply of it. That is why when we are given two weeks to do a project it takes two weeks, and when
we are given eight weeks to do the same project it takes eight weeks. That is why when given $1,000 to
complete our work we get it done with $1,000 and when given $10,000 to complete the same work, it
takes $10,000. Profit First makes Parkinson’s Law an asset. By taking profit first the money available for
expenses lessens, and we are forced to find ways to get the same things done for less money....
...DON’T CHANGE HABITS, LEVERAGE THEM
Many entrepreneurs try to force themselves to become better at accounting and to become more disciplined
in their fiscal management by pure willpower. But just like a muscle, willpower can be drained. And in a
moment of financial stress or bigger than expected expenses the entrepreneur will break their own fiscal
rules and spend the money they have. The Profit First principle does not try to change your habits (that is
nearly impossible to do), Profit First works with your existing habits. By first allocating money to different
accounts, and then removing the temptation to “borrow” from yourself, your business will become fiscally
strong and you will benefit from regular profit distributions.Target Allocation Percentages v2.0.pdf (151.1 KB)