The Profit First Trap: When Your Bank Balance Lies to You
Almost every shop owner or tradesperson falls into this trap at least once.
The income account is full. The bank balance looks strong. Suddenly everything feels affordable. New tools. Extra parts. Maybe that lift you’ve been eyeing. On paper, it looks like a good month.
But that balance isn’t spending money. It’s unassigned money. And that difference is where Profit First either protects your business or quietly makes things worse.
The Income Account Is Not a Spending Account
In Profit First, the income account is a holding tank. A waiting room. A staging lane. Money passes through it briefly before being assigned a job. When business owners treat it like a permission slip to spend, cash disappears fast.
Payroll becomes stressful. Taxes sneak up. Owners wonder how revenue was strong but there’s nothing left to show for it.
Parkinson’s Law and the “False Available Balance”
Parkinson’s Law tells us that work expands to fill the time available. Money behaves the same way. The bigger the balance you see, the looser your spending decisions become.
That’s how a false available balance forms. Your bank shows one number, but that number still includes money for payroll, suppliers, taxes, rent, subcontractors, and future repairs. Until that money is separated, every purchase feels justified.
If you’ve ever thought, “My bank says I’m fine, but my accountant says I’m broke,” this is exactly why.
How to Fix the Profit First Pitfall
The solution is simple but powerful: make the income account boring.
Money comes in. Money gets allocated. The account empties. That’s it.
By separating funds into profit, owner’s pay, operating expenses, taxes, and season-specific reserves, your bank balances become honest. Operating expenses show what you can actually spend. Taxes are already spoken for. Busy season and race season costs are planned, not panicked.
Clarity Beats Optimism
Profit First works because it puts guardrails around optimism. When accounts are structured correctly, you gain clarity, control, and long-term profitability without relying on gut feelings or misleading balances.
If your income account has been acting like a green light to spend, it’s time to shift gears. With the right structure, your money starts working for you instead of against you.