Profit First Bank Accounts & Setup

One of the first hurdles when people start looking into Profit First is the whole “multiple bank accounts” thing.

It’s understandable. On the surface it sounds complicated and this is the part that I find business owners struggle with the most. But once you set things up properly, it actually makes money management simpler, not harder.

Let’s dig into the most common questions I hear about accounts and setup.

Do Profit First accounts need to be everyday or savings accounts?

Great question and the answer is: it depends.

It is important to understand the difference between an everyday account and a savings account. As a general rule, savings accounts yield interest, but are limited in the number of withdrawals during the statement period. An everyday account typically offers many withdrawals and cheques, but does not yield interest. 

Option 1: Since Profit First encourages the 10/25 rule (allocate funds and pay bills on the 10th and 25th) for most businesses, all accounts except for the Operating Expense (OpEx) account can be savings accounts. Note that a savings account can’t write cheques, so Owner’s Pay, Tax, Profit and other accounts won’t be able to issue cheques. 

Option 2: Following the 10/25 rule, the Income account will accumulate all deposits until they are allocated to the Profit, Owner’s Pay, Tax, OpEx and other accounts on the 10th and 25th at which time those funds will be used for those specific account’s purpose. Therefore, incoming funds “sit” in the Income account for approximately 28 days a month. Understanding this, the Income account can be setup as a savings account (to accumulate interest) and all the other accounts can be everyday accounts. This will allow the most flexibility for withdrawals and writing cheques, while accumulating the most interest. 

A note on bank charges: Most banks these days don’t charge a monthly fee for basic business accounts but if yours does, those charges can add up quickly when you’ve got multiple accounts running. Always check the fine print. If your bank isn’t flexible on this, shop around. Many regional banks, credit unions, and online banks offer low or no-fee options that suit Profit First really well.

More bank accounts = more bookkeeping work. Is it really worth it?

Short answer: YES.

Reconciling multiple accounts with Profit First is no harder than reconciling one. In fact, it can often be easier.

Here’s why:

• You’ll only need to reconcile deposits and periodic transfers from the Income account.
• All bills come out of OpEx.
• The other accounts usually only see two transfers in (10th & 25th) and two out.

That’s it. Super simple. And the trade-off? You instantly know what money is set aside for what purpose. No more guesswork, no more late-night panic about whether you can afford that next bill.

Which banks are best for Profit First?

Honestly, the best banks are usually the ones who don’t give you grief about having multiple accounts.

Community banks, credit unions, and many regional banks tend to be flexible, with fewer fees and lower (or no) minimum balance requirements.

If your bank tries to charge you fees for zero balances or makes it hard to set up multiple accounts, shop around. The right bank will understand your needs, and if they don’t? They’re not the right bank.

Basic vs Advanced Method: Which should I start with?

Mike Michalowicz’s book outlines two options:

• Basic Method: The basic method of Profit First suggests establishing four accounts (Profit, Owner’s Pay and Tax) in addition to keeping your current everyday account for deposits and to pay bills. If three new accounts feels like too much, you can start with just two accounts: your current everyday account and add a Profit account. This basic method is a good way to “ease” into Profit First.
• Advanced Method: The advanced method of Profit First suggests establishing minimally five accounts: Income, Profit, Owner’s Pay, Tax and Operating Expenses. Additional accounts are suggested for specific needs (e.g. Payroll account for employees, a Drip account for distributing income over time, etc.). The advanced method is the superior approach since it separates deposits from any outbound cash flow (writing cheques, etc.) and has additional accounts, making it very clear what money is available for what purpose.

If five new accounts feels overwhelming, start simple. But I always encourage clients to work towards the advanced method, the clarity and control it gives you is worth it.

Final Thoughts

Setting up Profit First accounts might feel like a hassle at first, but once you’ve got them in place, you’ll never look back.

Remember: this isn’t about making your bookkeeping harder. It’s about making your money clearer so you know exactly what’s available for profit, your pay, taxes, and expenses at a glance.

Want tailored support setting up Profit First for your business? Book a Curiosity Call with me here.