Avoiding Common Pitfalls in Profit First Implementation
In this episode, we’re tackling the biggest mistakes business owners make when implementing Profit First—and how you can avoid them to keep your finances on track. I’m Deb Halliday, certified Profit First Professional, and I’ll walk you through three common pitfalls I see time and again with UK businesses.
First up: neglecting your tax account. It’s all too tempting to dip into those tax funds when cash is tight, but this can lead to serious headaches with HMRC down the line. I’ll share why treating your tax account as completely off-limits is one of the smartest moves you can make.
Next, we’ll talk about the importance of consistency. Profit First only works when you stick to a regular schedule for allocating your money. I’ll give you practical tips for setting up a routine—so you don’t fall into the trap of skipping allocations during busy periods and missing out on profit.
Finally, we’ll tackle lifestyle creep. As your business grows, it can be tempting to let your expenses grow too. I’ll show you how keeping a lean approach to operating costs can double your profits, with a real-life success story to prove it.
Whether you’re new to Profit First or want to tighten up your current system, this episode is packed with actionable advice to help you build a business that truly works for you.
Takeaways:
- Keep your tax account untouchable to avoid future financial stress.
- Stick to a consistent allocation schedule for best results.
- Watch out for lifestyle creep—keep expenses lean as revenue grows.
- Regularly audit your costs and cut what you don’t need.
- Prioritise tax allocations to stay ahead of HMRC.
- Make regular allocations a habit to build a stronger, healthier business.
Links mentioned:
debhalliday.co.uk
Transcript
Welcome to Profit first with Deb Halliday.
Speaker A:That's me.
Speaker A:I'm Deb.
Speaker A:I'm a Profit first professional and trainer, author of how to Build a Financially Healthy Business, founder of the Accounts Ladies, an award winning accountancy practice and the Accounts Office training Academy.
Speaker A:This.
Speaker A:This is the show for business owners who want to stop stressing over money, keep more cash, pay themselves more and build a business that truly thrives.
Speaker A:Just a quick note, Profit first is a licensed methodology.
Speaker A:Everything here is designed to help you implement it in your own business.
Speaker A:If you're interested in helping others with Profit First, I'll share how you can apply to become certified too.
Speaker A:Let's get started before, because your business should work for you, not the other way around.
Speaker A:Hello and welcome back to Profit first with Deb Halliday.
Speaker A:I'm Deb, your certified Profit first professional.
Speaker A:And today we're diving into what not to do when implementing Profit First.
Speaker A:Because sometimes the biggest leaps forward come from simply avoiding the classic pitfalls.
Speaker A:Now, if you're listening just chances are you've already set up your Profit first accounts.
Speaker A:Brilliant.
Speaker A:That's a huge step.
Speaker A:But as with any system, it's not just about getting started.
Speaker A:It's about sticking with it and using it well.
Speaker A:Even the best systems can trip you up if you're not careful.
Speaker A:So let's walk through three common mistakes UK businesses make with Profit first and more importantly, how how you can dodge them.
Speaker A:Mistake number one, neglecting the tax account.
Speaker A:Let's start with the tax account, one of the most misunderstood and frankly, tempting pots to dip into in the uk.
Speaker A:VAT and corporation tax can sneak up on you before you know it.
Speaker A:I've seen it time and again.
Speaker A:A business owner gets a bit tight on cash, borrows from the tax account and suddenly they're facing a 10,000 pound HMRC bill with nothing set aside to pay it.
Speaker A:That's a stressful place to be.
Speaker A:So what's the fix?
Speaker A:Treat your tax account as if it's completely off limits.
Speaker A:Imagine it's locked in a safe you don't have the key for.
Speaker A:If you're VAT registered, make it a habit to allocate 20% of every sale into a separate VAT pot.
Speaker A:And always keep an eye on your VAT return deadlines, whether you file quarterly or monthly.
Speaker A:Trust me, your future self will thank you for the discipline.
Speaker A:Mistake number two is inconsistent allocations.
Speaker A:Profit first is all about rhythm and routine.
Speaker A:Mike recommends allocating funds on the 10th and 25th of every month.
Speaker A:However, I've found that different Businesses favor different rhythms.
Speaker A:If you're paid monthly, monthly allocations could work.
Speaker A:If you're paid throughout the month, weekly allocations can work well.
Speaker A:Whatever you choose, stick to it.
Speaker A:Why?
Speaker A:Because consistency builds financial muscle memory.
Speaker A:I worked with a retailer who tried to self implement Profit first but skipped allocations during their busiest season.
Speaker A:They thought they'd catch up later, but when they finally checked their accounts there was zero profit left.
Speaker A:The lesson?
Speaker A:Life gets busy, but your allocations need to be non negotiable.
Speaker A:Set calendar reminders, use automation if your bank allows and make it part of your business routine, just like invoicing or payroll.
Speaker A:The third pitfall is lifestyle creep.
Speaker A:As your business grows, it's so tempting to upgrade.
Speaker A:Maybe a fancier office, new software, subscriptions, or even just more frequent lunches out.
Speaker A:But Profit first is designed to keep your expenses lean so you keep more of your hard earned money.
Speaker A:One London freelancer I worked with doubled her profit in a year simply by sticking to 40% operating expenses.
Speaker A:Even when her revenue spiked, she resisted the urge to inflate her spending and the results spoke for themselves.
Speaker A:What if I can't cover my expenses with my current percentages?
Speaker A:This is a question I get all the time.
Speaker A:What if my operating expenses account isn't enough to cover my bills first?
Speaker A:Don't panic.
Speaker A:This is actually a sign that your business is ready for a tune up.
Speaker A:Start by auditing your costs.
Speaker A:Are there subscriptions you don't use, suppliers you could negotiate with, or cheaper alternatives that work just as well?
Speaker A:Sometimes even small tweaks like switching software or renegotiating contracts can make a big difference over the year.
Speaker A:So here's your action step for this week.
Speaker A:Check your tax account.
Speaker A:Is it growing as it should?
Speaker A:If not, double check your allocations and make sure you're setting aside enough for VAT and corporation tax.
Speaker A:And if you find you're tempted to dip into that pot, remember that money isn't yours, it's hmrcs.
Speaker A:Protect your future self thanks for tuning in to Profit first with me, Deb Halliday.
Speaker A:If you found today's episode helpful, please subscribe, leave a review and share it with another business owner who needs to hear this.
Speaker A:For more resources, courses and to connect with me, head to debhalliday.co.uk and remember, when you put profit first, you build a business that reduces the stress while it supports your goals and dreams.
Speaker A:See you next time.
