Page 33 - Profit assessment Template v1

or resources rather than sacrifice efficiency for what you think are savings. Almost all businesses have
expenses which do not contribute to the generation of profit – we need to make sure that we cut those
out, not the ones that do have a positive effect on profit growth.

Mistake #5 – “Plowing Back” & “Reinvesting”

These are ‘fancy’ terms to justify ‘borrowing’ from our dedicated accounts to cover expenses. Using a
credit card to cover what you can’t afford should be a ‘red flag’ that your expenses are too high – we
need to deal with the problem and cut the expenses, not use the credit card more. If you think that you
need to ‘plow back’ profits into the business, you should reassess the situation – inevitably, there is a
more sustainable way to maintain the health of your business. Reinvest thought, not money.

Mistake #6 – Raiding The Tax Account

Paying more taxes is an indicator that your business health is improving – as your profit grows, so will
your taxes. By all means consult with your tax advisor to mitigate taxes wherever possible (apart from
splurging on additional costs for things that you don’t need and won’t improve your profitability in the
long run), but don’t ‘borrow’ from your Tax Account – that money does not belong to you, it belongs to

your Government and you need to make sure that you have it available when they need it. If you get left
with a surplus in this Account at any point, it will be reallocated to your Profit Account, not your OpEx
Account!

Mistake #7 – Adding Complexity

Cash is cash – you either have it or you don’t. That is why Profit First does not need to be more complex
than people think. The system is easy and is designed to work with your natural behaviours. It doesn’t
need to be overthought, or be more complex. It doesn’t need to be outsmarted. It is simple for a reason.

Mistake #8 – Skipping The Bank Accounts

Attempting to ‘simplify’ the Profit First system by not setting up the bank accounts is a recipe for failure
– using a spreadsheet to emulate the various accounts inevitably ‘falls over’ at some point, and the
immediate reaction tends to be that Profit First ‘didn’t work’, ie the system takes the blame – the problem
however is that the system wasn’t used properly in the first place…

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