roaming-panda-llc/allocation-calculator

Allocation Calculator

Calculate the exact dollar amounts to transfer to each Profit First account based on income received and current allocation percentages.

When to Use

Use this skill on allocation days (10th and 25th of each month) to calculate how much to transfer from the INCOME account to each destination account.

Input Required

1. Income Amount: Balance in INCOME account to be allocated
2. Allocation Percentages: Current percentages for each account
   • Profit %
   • Owner's Pay %
   • Tax %
   • OpEx %

Note: Use CURRENT percentages (CAPs), not target percentages (TAPs), unless you've fully transitioned.

Calculation

For each account:

Allocation Amount = Income Amount × (Percentage / 100)

Response Format

## Profit First Allocation

### Income to Allocate: $X

### Allocations

| Account | Percentage | Amount |
|---------|------------|--------|
| Profit | X% | $X.XX |
| Owner's Pay | X% | $X.XX |
| Tax | X% | $X.XX |
| Operating Expenses | X% | $X.XX |
| **Total** | **100%** | **$X.XX** |

### Transfer Instructions

1. ✅ Transfer $X.XX to **PROFIT** account
2. ✅ Transfer $X.XX to **OWNER'S PAY** account
3. ✅ Transfer $X.XX to **TAX** account
4. ✅ Transfer $X.XX to **OPEX** account

### Hold Account Transfers (Separate Bank)

After the above transfers:
- Move PROFIT balance to **PROFIT HOLD** at separate bank
- Move TAX balance to **TAX HOLD** at separate bank

### Verification
After all transfers, INCOME account should show: $0.00

Example Calculation

Input:

• Income to allocate: $10,000
• Profit: 5%
• Owner's Pay: 50%
• Tax: 15%
• OpEx: 30%

Output:

| Account | Percentage | Amount | |---------|------------|--------| | Profit | 5% | $500.00 | | Owner's Pay | 50% | $5,000.00 | | Tax | 15% | $1,500.00 | | Operating Expenses | 30% | $3,000.00 | | Total | 100% | $10,000.00 |

Handling Cents/Rounding

When allocations don't divide evenly:

1. Calculate each allocation and round to nearest cent
2. Any rounding difference (usually a few cents) goes to OpEx
3. Total must equal exact income amount

Example with rounding:

• Income: $1,547.00
• Profit 5%: $77.35
• Owner's Pay 50%: $773.50
• Tax 15%: $232.05
• OpEx 30%: $464.10
• Total: $1,547.00 ✓

For Product Businesses with Materials Account

If the business has a Materials/Inventory account, allocate that FIRST:

1. Materials: X% → Materials Account
2. Remaining = Income - Materials allocation
3. Apply TAPs to Remaining (this is the Real Revenue)

Example:

• Income: $10,000
• Materials: 40% → $4,000 to Materials
• Remaining (Real Revenue): $6,000
• Apply TAPs to $6,000:
  • Profit 5%: $300
  • Owner's Pay 50%: $3,000
  • Tax 15%: $900
  • OpEx 30%: $1,800

Validation Checks

Before presenting allocations, verify:

• [ ] All percentages sum to 100%
• [ ] All amounts sum to income total
• [ ] No negative amounts
• [ ] Amounts are rounded to cents

If percentages don't sum to 100%, alert the user and ask them to verify their current allocation percentages.

Important Reminders

1. Allocate PROFIT first - This is the core principle
2. Use current percentages - Not targets unless fully transitioned
3. Transfer to HOLD accounts - Profit and Tax should move to separate bank
4. INCOME should be empty - After allocation, nothing left in INCOME
5. Only pay bills from OpEx - Never from other accounts

Attribution

Allocation methodology from Profit First by Mike Michalowicz. For the complete methodology, see "Profit First" at profitfirstbook.com.