Erika Jones, CFO, CCTAProfit First Professionals · Certified Fractional CFO and Profit First Professional

Can I Do Profit First On A Spreadsheet?

6 Apr 2021 · 2 min

Watch on YouTube

1:46

In this short video, Profit First author Mike Michalowicz debunks the common myth that the Profit First cash‑management system can be effectively run using spreadsheets or an accounting program. He explains that Profit First relies on behavioral triggers: entrepreneurs naturally check their bank balances frequently and make decisions based on the cash they see. By allocating funds into separate bank accounts for profit, taxes, operating expenses, etc., the system makes those allocations visible at the point of decision‑making, reinforcing the desired behavior. Michalowicz cites informal surveys of hundreds of thousands of entrepreneurs—90‑100% of respondents check their bank accounts regularly—to argue that the system must be implemented at the bank level, not in spreadsheets or accounting software. He contrasts this with traditional advice to focus on income statements, balance sheets, and cash‑flow metrics, stating that while those tools are useful, they do not change the entrepreneur’s natural decision‑making habits. The key takeaway is to set up dedicated Profit First bank accounts to channel behavior and improve money management.

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Hi, I'm Mike Michalowicz, the author of Profit first. And I am so happy that there's over 500,000 businesses that have implemented Profit first and is growing daily. Unfortunately, there's some myths that need to be busted. One of the most common myths I hear is that Profit first can be done on spreadsheets or you can do it in your accounting system. You don't need to do it. Banks. Well, if you hear that, that person explained that clearly doesn't understand behavioral intercepts because Profit first is a cash management tool that works with our natural beh. I've surveyed hundreds of thousands of entrepreneurs, both formally through traditional surveys and also at conferences I speak at just by the raise of hands. And I ask people entrepreneurs, how often do you check your bank account balances to see how much money you have and make financial decisions around it? 90% of the hands go up. Sometimes 100% of the hands go up. Most entrepreneurs are checking their bank accounts weekly, monthly, daily. I mean, are you. It's likely you are. And based upon the money we see there, we make decisions. That's why the Profit first system must be set by your bank. What we do is we pre allocate money to its intended use. So now you get to continue that behavior of log into your bank account and you see what the money's intended use is. For years we've been told never look at your bank account. Log into your accounting system. Read the income statement, the balance sheet, the cash flow statement, tie those in together, know the operating cash ratio, the inventory turn, all these things. You'll manage your business well, and it's true you will. But we don't do it. The key is not to change your behavior. The key is to channel your behavior. And that's what Profit first does. So make sure you set up the Profit first accounts at your bank. You'll manage your money better than ever before.