Concept
Allocation Rhythm
Allocation rhythm is the habit of moving incoming revenue into separate purpose accounts on a fixed schedule, typically the 10th and 25th of each month, rather than whenever money arrives, so spending decisions follow a calm, predictable cadence.
In Mike Michalowicz's Profit First method, every deposit lands in an income account first. Twice a month, that balance is split by set percentages into profit, owner's pay, tax and operating expenses. The rhythm matters as much as the percentages. If you transfer every time a payment arrives, allocation becomes an endless chore that keeps you reacting to each deposit. If you wait irregularly, the income account swells until it looks like spendable money. That is the very trap separate accounts exist to remove. A fixed cadence also gives your bills a window. You pay them after allocating, and only from the operating account, so you always see what is genuinely available. Because each cycle covers a similar stretch of time, you can also compare cycles. After a few months, slow fortnights, seasonal dips and a growing tax bill stop being surprises.
A real-life example
Dana runs a small landscaping company in Leeds. She used to check her single account whenever a client paid and decide then whether to buy new equipment. Now payments collect in an income account. On the 10th and 25th she spends twenty minutes moving 5% to profit, 50% to her pay, 15% to tax and the rest to operating expenses. Supplier invoices wait until the 11th or 26th. When the VAT bill arrived in April, the money was already set aside.
How to use it
- 1Pick two fixed allocation days (the 10th and 25th work for most businesses) and set them as recurring calendar reminders.
- 2On those days, move the entire income-account balance into your purpose accounts by your chosen percentages. Leave money that arrives in between untouched until the next date.
- 3Pay bills the day after each allocation, and only from the operating-expenses account, so every payment reflects what is truly available.