No Temptation Accounts
Jan 23, 2022
One of the most important tips for business owners is to avoid temptation accounts. Now what exactly do we mean by that? Well, in this case, I'm talking about the temptation to borrow money from one account to fund another, or robbing Peter to pay Paul, as they say. While this may seem like a perfectly reasonable action, in reality, it means stealing for yourself to pay a bill or make a purchase for your business.
So what can we do to avoid this?
When an account is used for more than one purpose, it becomes too easy to pull additional funds from one purpose to cover for the other. To avoid this, the profit first model utilizes multiple bank accounts, each to hold money for one specific purpose. Another way to reduce the temptation to steal from the profit or tax account is to have different accounts set up at various banks across town so that it is harder to transfer money from Point A to Point B.
This temptation most often occurs when the operating expense account runs low and there are bills to pay. Borrowing money from another account to address this problem is simply a band aid solution and ignores the deeper issues running below the surface. If you find yourself in this situation, your business is screaming at you telling you there is a problem. Do not allow yourself the easy way out of transferring money from elsewhere and ignoring the situation. Sooner rather than later, you will be dealing with an even larger problem, so tackle it head on as soon it appears.
If you're interested in learning more about how these no temptation accounts work, please reach out! We promise it won't be a sales pitch call -- we are much more interested in helping you gain clarity as well as ensuring you have time and space to ask questions. Or check out my recent YouTube video.
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