Mike Michalowicz Profit First Bi-Weekly Allocation

Execute the Profit First bi-weekly routine by calculating income account balances, transferring allocation percentages, and paying invoices strictly from operating expenses.

4 time blocks, 40 minutes in total.

Time blocks

Income Account Audit: 5 min
Calculate total accumulated revenue in your primary income account
Target Percentage Allocation: 10 min
Transfer set percentages into Profit, Owner Comp, Tax, and Opex
Invoice and Bill Payment: 15 min
Pay outstanding vendor invoices strictly out of the Opex account
Expense Ledger Reconciliation: 10 min
Log all payments and verify remaining operating balance

About this routine

The Profit First bi-weekly routine was created by author Mike Michalowicz to transform how small business owners handle cash flow. Instead of paying expenses first and taking whatever money remains as profit, this system flips the accounting formula. On set allocation days, usually the 10th and 25th of each month, all accumulated revenue in the main income account gets divided across target bank accounts.

During this session, funds are allocated by pre-determined percentages into four primary buckets: Profit, Owner Comp, Tax, and Operating Expenses. Every bill and vendor invoice is then paid exclusively out of the Operating Expenses account. If the balance in Operating Expenses cannot cover your bills, it signals an immediate need to cut unnecessary overhead rather than borrowing from tax or profit funds.

By repeating this rhythm twice a month, business owners gain clear visibility into cash health without reading complex financial statements. Running this sequence with a structured routine timer keeps allocations precise and prevents administrative drift.

Why this routine works

Ensures guaranteed business profitability before paying operating expenses.
Prevents tax season surprises by setting aside dedicated tax reserves.
Establishes clear boundaries on operating expenses to curb overspending.

FAQ

What is the Profit First bi-weekly rhythm?

It is a cash management process where a business owner transfers accumulated income into dedicated bank accounts for Profit, Owner Comp, Tax, and Operating Expenses twice a month, usually on the 10th and 25th.

What order do you pay bills in Profit First?

You allocate revenue to your Profit, Owner Comp, and Tax accounts first. Invoices and bills are paid last, strictly out of the remaining funds in your Operating Expenses account.

How often should you do Profit First allocations?

Mike Michalowicz recommends performing allocations and bill payments twice per month on a regular schedule, such as the 10th and 25th.

Sources

Profit First: Transform Your Business from a Cash-Eating Monster to a Money-Making Machine by Mike Michalowicz