Distributing money from your main account to specific accounts is necessary when you implement Profit First in your business. When you begin this process, you create target percentage goals for each account. However, those percentages may not be the best for your business. You may choose a percentage that isn’t high enough for one category. Or you may find that you are allocating too much money to a specific account. So, what should you do to fix it? I recommend reassessing your Profit First distributions. Today, I am going to share when you should reassess your distributions, as well as how to do it. 

When and How to Reassess Your Profit First Distributions

When to Reassess

I find it is always best to reassess your Profit First distributions every quarter. This will allow you to see how well your current allocations worked for three months. 

If certain percentage allocations are working for one or two categories, great! You may find that only one or two other categories need a little work when it comes to the percentages you assigned. 

Take a closer look at those categories to see where you may be able to make improvements. I will share more about how to do this next. 

You should also reassess your Profit First distributions when your revenue changes. You can usually wait until the quarterly mark, to ensure your revenues are going to be continuously at the new number. 

How to Reassess Your Profit First Distributions

One of the first categories you should check when reassessing your Profit First distributions is your operating expenses. Hopefully, you will have allocated too much money to this account and you have a nice surplus. However, the opposite could be true and you may be running in the red. 

If you have a surplus in your operating expenses account, you can easily start to reduce your percentage for that account by a percent or two. You can then revisit next quarter to see if you can reduce it further. 

Now, if you are in the red, or close to it every month, you will need to allocate more money for your operating expenses. Before you do that though, see if you can reduce your expenses. Make a few phone calls to see if you can get certain bills reduced. Cancel a subscription that is no longer being used. Look at your expenses from every angle.

As you are reassessing your Profit First distributions, you may be tempted to reduce your profits or owner’s pay percentages. I never recommend lowering these percentages, even if your revenue is down slightly. Yes, it would be the easiest solution when you need to boost other accounts. But it can lead to other issues in the future. 

Reassessing your Profit First distributions will get easier over time. However, if you are struggling, talk to your bookkeeper.  We are always available to help you when it comes to what is best for your business financially.