How I process a deposit with YNAB + Profit First

I love the Profit First methodology to help small businesses be more profitable. I first read the book Profit First: Transform Your Business from a Cash-Eating Monster to a Money-Making Machine, by Michael Michaelowicz in 2015 and shortly thereafter started using it for my organizing. It revolutionized how I think about my business’s money. When I started using YNAB for my business in 2018 I discovered that it made Profit First easier. It’s a match made in heaven.

Before YNAB, I had separate bank accounts (per Profit First) for Owner’s Pay, Operating Expenses, Taxes and Profit. Now, I just have one checking account and one high-yield savings account for my business. Instead of separate bank accounts, I have separate YNAB categories (in a category group called Profit First).

Here’s what my Profit First category group looks like. (This is a demo budget.)

My business is small, but I do have employees and I occasionally use subcontractors. So right below the Profit First category group, I have a category group called Labor & Materials. It looks like this.

The third and final component of my system is the spreadsheet I created that helps me calculate my Real Revenue which, in Profit First parlance, is gross revenue minus labor and materials. Once the Real Revenue is calculated, the spreadsheet applies the allocations I’ve established for Profit, Taxes, Owner’s Pay and Operating Expenses.

Here’s a peek at my sample Real Revenue spreadsheet.

When a check is deposited, it shows up in my business checking account in YNAB. I go to the spreadsheet, fill in the gross amount, along with any labor and materials amounts, and then use the allocations from my Real Revenue spreadsheet to assign the dollars YNAB. I made a little video to demonstrate.

The spreadsheet makes the process very easy. I recognize that if I were handling a lot of deposits this might not be sustainable. But since I only get deposits some days, and rarely more than two, I love doing it this way. In fact, processing deposits is my favorite part of my morning YNAB routine!

I offer YNAB + Profit First coaching. If you’re interested in implementing the Profit First into YNAB, set up a free Discovery Call!