Profit First or cash flow projection. Which is better?

Profit First or cash flow projection. Which is better?

Profit First is a relatively simple system to implement, and it constrains your spending based on the amount of money that comes into your bank account.

It’s based on the past.

A cash flow projection is based on what happens to your bank account balance in the future.

So you can make spending decisions now based on the impact it will have on the future.

Profit First is helpful if you get tempted when there’s like a lot of money in your bank account.

You might find yourself thinking, “oh, I could make that new hire” or “I should invest in growth.” Then Profit First is a really good way to put some guardrails around that kind of enthusiasm.

A cash flow projection is helpful for taking calculated risks. Before you make a big spending decision, you can put it in the cash flow projection and see whether it’s going to lead to you going broke… or to the business bank account getting a bit lower than you’re comfortable with, in future months.

For example, if you do want to hire or you want to spend money on a growth project, you can pop it into the cash flow projection and see whether the business can afford it.

So Profit First or cash flow projection… which is better?

Well, actually you can run both.

Profit First guards the money that you have now. And a cash flow projection helps you make decisions about the money you’ll have in the future.

But if you’re not sure whether a cash flow projection is right for you or not, I built a tool to answer that question.

It’s free. It doesn’t take very much time to use.

Just DM me the word NEED on Instagram @benmcadamig and I’ll send you the link.