The Profit First 10-25 rule says to move all money from your income account into operating accounts on the 10th and 25th of each month, matching when bills are due. Your income account only collects deposits and never pays anything out, so you see exactly what you have to work with twice a month.
In profit first you have a 1025 rule. What is that?
Good question. So that represents the days of the month, the 10th and the 25th. And the idea is money flows into your business. And we're putting into the income account. The income account is a depository only account. It just collects cash. Cash, never touch the money. So as you get deposits put in the income account, then twice a month on the 10th and 25th, all the money in the income account gets allocated out to the other accounts you set up. So you zero out the income account and allocate it out. The reason we do the 10th and 25th is your opex. Your operating expenses will be funded on those days. Then you can pay your bills. And you pay bills on the 10th, they usually arrive by mid month. Pay bills on the 25th, they arrive by the end of the month. Those are the two days when bills are typically due. So it gets you in a rhythm with your vendors and it also allows you to see the ebbs and flows of your business. Money accumulates your income account, you'll see what your normal expected income is. And then you allocate it all out on the 10th. You do this process again on the 25th. And just by monitoring it, you start setting an expectation of what your income should normally be.
And can I change those dates? Oh.
Yeah, right. And you can change those dates so they're not hard and fast. It's a good starting point. And then as you get the system rolling, then make some tweaks that are better for you. I suggest you start with it just to see how the rhythm serves you.
