Once all five of your Profit First bank accounts are set up, it’s time to figure out the allocation percentages so you can begin to transfer funds each week. The actual transfer of funds from the income account to the other four accounts is where you will see the magic happen. I can’t wait for you to get started!
So how in the world do you know what percentage to use for each account? Great question!! And I know you’re wondering how you’ll have enough in the Operating Expense account to pay all the bills and not run short – especially if you’re feeling like things are really out of whack with your finances.
I want you to first promise you’re going to stick with it once you go to all the work to do the self-assessment. Please make this promise to yourself. If you don’t write it down and really make the promise to yourself and things get tough – you’ll be so tempted to quit. Remember change always brings a bit of stress because things are different. The natural inclination is to want to go back to the way it was before – but that makes no sense because that’s why you’re here trying to make a change. Somethings not working and you are ready for it to be better. Profit First Better!
I created a chart in the Profit First for Dentists book that includes the ranges in percentage for each account that you could expect to have. What’s correct for your practice will be different than the practice down the street or in the next state. Every practice is different. I’m sharing the categories and the range for each right here in this blog. I want you to see what is possible. You see, this is what my clients are actually doing. And they are getting better and better at it over time.
Income Account: 100% of all Deposits
Profit Account: Range of 1-20% with an average of 6%
Owner’s Compensation Account: Range of 12-25% with an average of 17%
Tax Account: Range of 7-15% with an average of 10%
Operating Expenses Account: Range of 55-75% with an average of 67%
Recently I’ve had dentists with 48 to 50% operating expense category and yes this includes loan payments and yes, they are contracted with some insurance companies.
Stay tuned here because next week I’m gonna get you started on gathering all the data for your own self-assessment. Let me know if you have any questions or want to chat! Click on the ‘Let’s Talk’ button in the upper right corner of this blog post page.
I’m here for you!
Barb Stackhouse RDH, M.Ed. Mastery Level Certified Profit First Professional