Profit First is all about establishing rhythms around the way we handle money. These patterns, when repeated regularly, become habits. Good money management habits are the end goal!. In this week’s article we’re covering the cash transfers from your income account to your other core Profit First accounts. In the Profit First book Mike talks about the ’10/25 Rhythm’.

What is the 10/25 Rhythm

When using the Profit First system cash will accumulate in your income account. While you should absolutely be tracking the inflow of this cash daily we don’t want you to transfer it everyday. Why? Because doing it everyday is just too much extra administration time. If we keep everything simple you are more likely to stick to it. Personally, I just like watching the cash accumulate!

Mike’s recommended rhythm for the transfers between your income account and your other Profit First accounts is built around the tenth and twenty-fifth of each month. That is, we only transfer the money twice a month.

Unlike the Australian banking system, the U.S still do much of their banking by cheque. A supplier invoice comes in, they write a cheque for the appropriate amount and post it to the supplier along with a remittance advice. By doing this on the 10th and 25th of each month the cheques arrive and can be deposited around about the dates most supplier invoices are due.

What do we recommend for Australian businesses?

We recommend that Australian business owners use a transfer rhythm that work well for their  business and personal situation. Every business is different and you will need to adjust the system to suit you. Some common examples we see in practice are:

• Sticking with the 10th/25th rhythm: Some business owners read the book and insist on following the steps exactly as written. There is absolutely nothing wrong with that. If it works for you then that is great!

• Match the transfers to your business’ natural income pattern: If all your customers pay at the same time of the month then you may want to do your transfers a day or two after the influx of funds is received;

• Match the transfers to an expense pattern: A common choice here is wages. If you pay your staff weekly then you may want (or need) to do the transfers weekly in order to pay wages on time;

• Every time you get paid: for businesses that do large jobs and only receive bulk payments on an infrequent basis you could consider doing the transfers each time a payment is received;

• Match to a personal financial pattern: Some business owners choose to do all their transfers on the day they want to draw their salary. For example, doing weekly transfers on Thursday morning because they go grocery shopping on Thursday night.

My Personal Experience

There is no single way to do it. I’ve seen many different dates and times used and it honestly doesn’t make a difference in the grand scheme of things. For me personally I do my transfers every second Thursday because my rent is due on the following Friday. I do all my PF transfers, draw my salary and the next day the money is in my personal bank account ready for the rent direct debit. That pattern just works for me… even if it seems crazy to everyone else!

Picking a relevant pattern and sticking to it is what counts. You need to establish the habit.

Further Information

Read our comprehensive review of Profit First here

Join the Facebook group here