{"id":11818,"date":"2024-04-08T07:34:24","date_gmt":"2024-04-08T11:34:24","guid":{"rendered":"https:\/\/craftbreweryfinance.com\/oldversion\/?p=11818"},"modified":"2024-03-04T12:50:13","modified_gmt":"2024-03-04T16:50:13","slug":"the-cash-envelope-system","status":"publish","type":"post","link":"https:\/\/craftbreweryfinance.com\/oldversion\/the-cash-envelope-system\/","title":{"rendered":"The Cash Envelope System"},"content":{"rendered":"

The Cash Envelope System<\/strong><\/p>\n

In the last post, we reviewed the Profit First<\/a> system. The basic idea: take your profits first, before expenses.<\/p>\n

The next step is to make sure you don’t spend your profits.<\/strong><\/p>\n

To do this, the Profit First book recommends setting up a number of different bank accounts that serve specific purposes.<\/p>\n

For example, open one bank account for depositing your sales receipts, and then have other accounts for profit,<\/strong> taxes, owner’s draw, and operating expenses.<\/p>\n

This idea is based on the old school “cash envelope system” where you take your personal cash and divide it up into different “envelopes” based on required savings or spending.<\/p>\n

For example, you’d have envelopes for savings, rent, groceries, car payment, entertainment. Whatever is in the envelope is the most you can spend.<\/p>\n

So, if your goal is 10% profit in your brewery, you put 10% right off the top into the profit bank account.<\/strong><\/p>\n

Here’s how this “envelope system” might look for a typical brewery:<\/strong><\/p>\n

    \n
  1. All cash receipts go to the Sales bank account: $50,000<\/li>\n
  2. This cash is then moved to different bank accounts in pre-determined percentages:\n
      \n
    1. 10% to the Profit account: $5,000<\/li>\n
    2. 10% to the owner’s draw account: $5,000<\/li>\n
    3. 15% to the tax account: $7,500<\/li>\n
    4. 75% to the operating expenses and cost of goods sold account: $32,500<\/li>\n<\/ol>\n<\/li>\n<\/ol>\n

      The idea here is that you can’t spend more than you have in each account.<\/p>\n

      The “envelope system” forces a disciplined approach to managing your cash, and prioritizing how it will be used.\u00a0<\/strong><\/p>\n

      Will this system work in your brewery?<\/p>\n

      Try it for yourself. Below are next steps to use the “envelope system” in your business.<\/p>\n

      Do this next:<\/strong><\/p>\n

        \n
      1. Watch the short explainer video below<\/li>\n
      2. Join the brewery financial network<\/a> – our members focus on Profit First all the time.<\/li>\n<\/ol>\n