Let's say you own a dental practice with four on staff and run Mike Michalowicz's Profit First by hand. On the 10th and 25th, after the last patient leaves, you log into the bank and move the percentages into profit, owner pay, taxes and operating expenses. Then payroll pulls $14,286.40 for your two hygienists, your assistant and your front desk, and operating expenses is short, because most of last week's insurance batches went to the other three accounts. So you pull from profit to make payroll, and the lab invoice for last month's crowns is still waiting.
I've heard versions of this from dentists, chiropractors and physicians, and it comes back to timing. Cards land daily, insurance lands in batches, and payroll, the practice loan and the lease each leave on their own date. A split on the 10th and 25th can't see those dates, and neither can a split on every deposit, so you build the split around them.
I'll walk you through where card and insurance payments should land, what comes off before the split, how to make payroll with a backstop, how to save for the loan and the lease, and what to do in a big month. I'll also make the case for paying bills before the split, which bends the book.
Why does a dental practice's money break Profit First?
Profit First breaks in a dental practice because money comes in on one schedule and goes out on another. The balance looks healthiest right before the biggest bills leave.
Let's say you run a practice with four on staff. Here's a month, with realistic numbers:
The 1st: the lease leaves, $4,850.
Every weekday: your card processor pays out yesterday's front-desk payments, somewhere between $900 and $2,400.
Twice a week or so: insurance batches land, $3,000 here, $6,212.48 there, with no pattern you can plan around.
Every other Friday: payday, $14,286.40, which your payroll provider pulls two days earlier.
The 15th: the practice loan leaves, $6,412.75.
Whenever it shows up: the lab invoice for last month's crowns.
Now run a percentage split on every deposit and watch the checking account. On the 12th it looks great, because three insurance batches just landed. On the 13th payroll pulls, and on the 15th the loan leaves. By the 16th you're looking at a number that makes no sense.
One dentist put it this way: the bills are "sprawled across the month... surprise bills." The same owner's workaround is one I hear a lot: "I kind of let the business make more money throughout the month and then I pay the practice loan." That works until the month the money doesn't build.
When it doesn't, something fills the gap. Usually it's a credit card. Some owners try to fix it with another percentage. One dental practice we set up was sending 5% of every deposit to a debt account, a number with no link to what the card needed that month.
So the fix starts with where the money lands, because that decides when the split can run at all.
Where should card and insurance payments land?
Card payments should land in an income source, a feature in Sequence: an account with its own account and routing number, built only to receive money. Insurance can stay where it lands today. They're two different rails, so they get two different doors.
Point your card processor's payout at the income source, and the split runs the moment each payout lands. The change is small: in your processor's settings, swap the payout account from your business checking to the income source. Open the income source in the practice's name, the same name your processor pays, because a name mismatch is the most common thing that stops a payout from connecting. Moves between your Sequence accounts are instant, so Monday's card money is in the right accounts on Monday.
Insurance is different. Most practices are paid by a dozen or more payers, and re-registering bank details with every one of them is a project nobody wants. You don't have to. Therapists run into the same thing, and the answer is the same: keep insurers paying the account they pay today. Then a weekly automation, an instruction you set up in Sequence to move money on a schedule, rounds that account down to a cushion and moves everything above it into the income source, where the split runs.
That route has a delay. Sequence sees your outside bank's balance, not each deposit, so the automation runs on a schedule. A pull from an outside bank also takes 2 to 3 business days to arrive. So insurance money that landed Wednesday might not be split until the following week, and payroll can't wait that long.
What comes off before the Profit First split?
In a dental practice, lab fees come off before the split. Everything else gets split.
Mike Michalowicz builds this into Profit First. His percentages run on Real Revenue: total revenue minus materials and subcontractors. That's the money that was never yours to split. Contractors deal with it on every job, which is why our contractors post gives pass-through money its own setup.
In your practice, the lab is the subcontractor. When a patient pays for a crown, part of that payment is already owed to the lab that made it. So the split should run on what's left after the lab's share.
The easy way is a lab account. Let's say crowns and other lab work run about $3,140 a month. On about $75,000 a month in collections, that's roughly 4.2% of each deposit. Send that share to the lab account and pay lab invoices from there. One physician we set up does the same thing with blood work: "The lab company will charge me, and then I charge the patient. And so when I get charged for a lab, I just [route] it into this labs."
Supplies are different. Gloves, impression material and the rest are what it costs to run the practice, so they get paid from operating expenses after the split.
How do you run the split and still make payroll?
Give payroll its own account, fill it from the operating expenses share of the split, and add one backstop automation that checks it three business days before payroll pulls.
The split runs on every deposit that reaches the income source: taxes, profit, owner pay and operating expenses, in the percentages you and your accountant pick. Payroll is an operating expense, so it comes out of that last share.
That share doesn't land in one big pot. An automation tops up a payroll account first, to a target just above your biggest payroll. Let's say that's $14,300. Anything past the target stays in operating expenses for the lease, supplies and everything else. The payroll account has its own account and routing number, so you give those to Gusto, or ADP, or whoever runs your payroll, and they pull from there. They stop pulling from the account the split is running on.
Now walk a payroll week forward. Let's say Gusto pulls payroll on Wednesday for a Friday payday. Monday's card payout splits, and part of it tops up payroll. Tuesday's insurance batch lands at your current bank, so it waits for the weekly automation. By Friday, three business days before the pull, the payroll account is at $11,904.20. It's $2,395.80 short.
That's where the backstop comes in. It's a top-up automation on a schedule: three business days before payroll pulls, it checks the payroll account and fills whatever's missing from your current business checking, where insurance has been piling up. A pull from an outside bank takes 2 to 3 business days, so three days is the minimum. If your bank tends to run slow, give it four.
The money the backstop pulls hasn't been through the split yet, so in that one short week, payroll gets paid before profit and taxes take their share. That's why it stays a backstop. In a normal week it does nothing, because the split already filled the account.
An owner of a practice paid mostly by insurance put the problem plainly: "every two weeks, it's a big chunk of money." A chunk that size is the one bill a short week can't absorb, which is why payroll gets a backstop and the lease doesn't.
"And if the backstop fires every cycle?" Then payroll is too big for what's coming in right now. Fix it in the percentages or in the schedule. Don't pull it from profit.
How do you save for the practice loan and the lease?
Give each fixed bill an account of its own, fill it a little every week, and pay the bill in full on its due date. Your practice has three fixed bills that matter here: the practice loan, the lease and the credit card payment.
Fixed bills shouldn't share an account with variable spending. When they do, operating expenses swings all month, high after a batch and low after the loan, and you can't tell what's free to spend. Move the fixed bills into their own accounts, and the operating expenses balance stops swinging, because the big fixed payments come out of somewhere else.
The practice loan is the first one. Let's say it's $6,412.75 on the 15th. Every Monday, an automation moves a quarter of it, $1,603.19, from operating expenses into a loan account. On the 15th, a second automation moves 100% of that account's balance to the account the loan is paid from. Or give the lender the loan account's routing numbers, and the payment pulls straight from it. The dentist with the sprawled bills landed on the same idea for the loan: "every week, put a fourth of it in this account." Months with five Mondays leave a little extra, which is a cushion, so leave it.
The lease works the same way in a lease account. $4,850 on the 1st means $1,212.50 a week, paid in full on the 1st.
The credit card payment is the third, and it's where percentages break down. A percentage of each deposit has nothing to do with what the card needs this month. Use a target instead. Top the card account up to the statement balance, then stop, and set the card's autopay to pull from that account. Sequence fills the account. The card company still does the pulling. Once it's full, the money flows on to everything else.
Targets beat percentages for fixed bills because you can see at a glance whether the money is there. A clinic owner we worked with had set payroll and the lease as percentages of every deposit, then checked the accounts one night and found withdrawals that "looked like they were percentages of something." A target tells you exactly what each account is for.
What do you do with a big month?
In a big month, cap operating expenses at a set balance and sweep everything above it into a holding account. A big month isn't free money until the slow month has been paid for.
One dental practice I set up was averaging about $200,000 a month in revenue, with the odd month at $275,000. The owner asked what to do with the extra: "if we go over $200,000... we want 75%" of it to go somewhere else. That's the right instinct.
Here's how it works. Pick the balance operating expenses needs to run the practice, let's say $20,000. Once a week, a round-down automation shaves operating expenses back to $20,000 and moves the rest into a holding account. In a normal month there's little or nothing to move. In a $275,000 month, the extra lands in holding, where you decide what it's for: a slow summer, the next piece of equipment, or a bigger profit distribution.
Health practices lean on these automations more than most businesses. 29.2% of dental, medical and therapy practices paying for Sequence use balance conditions, automations that only run when an account is above or below a number, against 17.8% of all paying accounts. 20.8% use round-down automations, against 11.6% overall.
Should you pay your bills before the split?
Sometimes, yes, and I set it up that way often. But it bends the book, so here's the book's order, my order and when mine fits.
The book's order. Everything above follows it, apart from the backstop in a short week. Lab fees come off first, the split runs on what's left, and payroll, the loan and the lease are paid from the operating expenses share. Profit gets its cut before a single bill is paid. That's the point of the method.
My order. On a lot of practice setups, I flip the middle. Taxes come off first. Then payroll tops up to its target, then the fixed bills, and only then does the split run on whatever's left. Your bills are going to get paid either way, so pay them first, and now the number you're looking at is real. What's left is what you have for owner pay and profit, and you only pay yourself once there's enough to run the practice. Percentages were the workaround for doing all this by hand. Once the money can be moved by target, filling the bills first is the more honest picture.
When mine fits. It fits a practice where payroll is a big share of revenue and insurance timing is unpredictable, especially in the first year after buying or opening a practice. A three-person IT company I set up keeps two months of payroll in reserve and calls it "the first priority." If that sounds like you, put payroll first.
It has a real cost, though. Put bills first and profit goes back to being whatever's left over, which is exactly the habit Profit First was written to break. If you take my order, give profit a fixed share of what's left, and look at it every month. If it's empty three months running, your bills are too big for your revenue, and no order of automations fixes that.
What changes for chiropractors and physicians?
The setup above carries over to a chiropractic or physician practice almost as it is. Three differences come up on calls again and again.
Two doctors, one household. A lot of chiropractic practices are run by a couple, and the practice's money and the household's money run through the same two people. One chiropractor laid it out as "the clinic and everything on top. And then our personal stuff down here on the bottom," with both of their student loans in the bottom half. Give the student loans their own accounts and fill them from owner pay. They're personal bills, so they never touch operating expenses.
Lump-sum checks. Some chiropractic income arrives in one piece: "a case closes or... they'll send a lump sum check." Deposit it into the income source like anything else and let the split run. If it's big enough to distort the month, the big-month round-down above catches it.
A small daily draw. Some owners want a small, steady draw more than a big one every two weeks. One chiropractor told us: "All I need this whole platform to do for me is transfer like $100 a day from one bank account to the other." That's a scheduled automation from owner pay, and it works fine as long as owner pay is filling faster than $100 a day.
Where should you start?
Start with payroll. Point your card payout at an income source, set the split, and give payroll its account and its backstop. That's the piece that keeps Friday safe.
After one cycle, add the loan account and the lease account. After you've seen a strong month, add the round-down. Owners usually send too much to operating expenses at first, and that's fine. Watch a cycle or two, then pull it back to what the practice uses.
For the first few weeks, approve each move before it runs. You choose which moves run on their own and which wait for you, and you can change any automation whenever you want. If you'd like help mapping your payers, your payroll date and your loan onto this, book an onboarding call and we'll build it with you.
FAQ
Do I have to change where insurers pay me to use Profit First?
No. Insurers keep paying the account they pay today. A weekly automation rounds that account down to a cushion and moves the rest into Sequence, where it arrives 2 to 3 business days later and the split runs. If you ever want an insurer to pay Sequence directly, that's a change you make with that insurer.
How do dentists save for the practice loan?
Move a quarter of the monthly payment into a loan account every week, then move all of it to the loan payment on the due date, or let the lender's autopay pull from that account. The loan stops depending on how the month happened to go.
What Profit First percentages do dental practices use?
The book's starting percentages rarely fit a practice with staff. When one owner saw them, the reaction was: "Tell me, because I'm in the wrong business." Among health care businesses on Sequence that split by percentage, the middle setting is about 30% to owner pay, 30% to operating expenses and 14% to profit. That's a small group, so use it as a starting point. Your accountant should set the tax share.
Do I need a separate account for every bill?
Not at first. Start with payroll, the loan and the lease, and keep everything else in operating expenses. Add accounts after you've watched a cycle or two and know where the money actually goes.
Will my bookkeeper see every transfer?
Yes. Every account has its own account and routing number, so your bookkeeper adds them to QuickBooks like any other account or downloads the statements. Each account does one job, so each transfer has an obvious reason.
Is there a Profit First book for dentists?
Yes. Profit First for Dentists by Barbara Stackhouse and Drew Hinrichs (2021) adapts Mike Michalowicz's method for dental practices, with a foreword by Michalowicz. This post covers running it automatically.