Bring sense to the chaos
You didn’t get into the cafe business to become an accountant. You did it for the love of hospitality. The smell of coffee, the perfect pour, the sights of a happy community. You did it to build a dream.¹,²
But for too many owners, the reality is a high-stakes tightrope walk. A relentless cycle of managing high overheads, tight margins and the constant, gnawing anxiety of cash flow.³,⁴,⁵ Your business can feel less like a dream and more like a revenue vortex, sucking in cash as fast as you can make it.⁶,⁷
The problem is a simple, flawed formula we’re all taught: Sales−Expenses=Profit.
This makes profit an afterthought. A leftover. If there's anything left at all.¹ This guide is about flipping that formula on its head. Using the core ideas from Profit First and The Barefoot Investor, we’ll show you how to use a simple "bucket" system to manage your money with intention. This isn't theory. It's a practical plan to turn that financial drain into a permanently profitable and sustainable business.
Your first move: 3 steps to take right now
Feeling overwhelmed? Don't try to do everything at once. Start here. This is practical advice, not a textbook.
- Open one new account. Log into your business banking app right now and open a single, new, fee-free online savings account.
- Name it 'PROFIT'. This simple act makes its purpose real. It makes the money harder to raid for other things.
- Automate a 1% transfer. Set up a recurring transfer to move just 1% of your revenue into your new PROFIT account. The amount doesn't matter yet. The habit does. This is your first step.
Why your brain loves buckets
Financial success is about behaviour, not spreadsheets.¹⁰,¹¹ As Morgan Housel says in The Psychology of Money, how you behave with money is more important than what you know about it.¹⁰ Running your whole cafe from one bank account works against your brain's natural wiring.
It’s about mental accounting. When all your money sits in one big pile, it’s dangerously easy to spend.¹³ A busy weekend makes you feel flush. You see the big balance and think you can afford that new piece of gear. But a huge chunk of that money isn't yours. It belongs to the ATO for GST and PAYG. It belongs to your staff for super.
Buckets create positive friction. By splitting your money into separate buckets for specific jobs, you create a psychological hurdle.¹⁰,¹³ To overspend, you have to consciously move funds from a bucket clearly labelled 'Tax' or 'Profit'. The trade-off is obvious. It forces you to stop and think. It automates good habits and takes willpower out of the equation.¹⁰,¹³
The profit first blueprint: A new set of rules
The core idea is simple but powerful: flip the formula to Sales−Profit=Expenses.¹ This forces your business to run on what’s left over after you’ve taken your profit. It guarantees you get paid and forces you to be efficient. It’s a system designed to kill "entrepreneurial poverty."¹,⁷
The core account structure
To make this work, you need a few dedicated bank accounts.¹ Remember the quick start guide. Begin with just one 'Profit' account, then build out from there.
- Income account. All your revenue lands here first. Think of it as a temporary holding pen.
- Profit account. This is your reward. Your war chest for opportunities. Your business's safety net.
- Owner's pay account. This is for your personal salary. You need to pay yourself a consistent wage, just like any other employee.¹
- Tax account. This is where you quarantine the money you owe the ATO for GST and PAYG.
- Operating expenses (OpEx) account. After the other buckets are filled, the rest comes here. This is what you have to run the business. This scarcity is a good thing. It’s Parkinson's Law in action: it forces you to be innovative and lean.¹²
Target allocation percentages (TAPs)
TAPs are your goals for how to divide your revenue.¹
⚠️ A Word of Warning: The table below shows target percentages from the standard Profit First model. For a typical Australian cafe with high wage and rent costs, these numbers can seem impossible. Do not treat them as rigid rules. Think of them as long-term goals for efficiency. A much more practical approach is detailed in the next section. Always begin by allocating just 1% to Profit and work from your real-world numbers.
*Source: Adapted from Mike Michalowicz's general recommendations and Australian cafe benchmarks and our own knowledge and expertise.¹,³
*See the next section for a crucial, real-world explanation of this number.
A reality check on owner's pay: From percentages to a paycheck
You are right to look at the table above and think, "20% for Owner's Pay? That's impossible." With COGS at 25%, wages at 35% and rent at 10%, the maths don't add up.
This is the most common point of confusion with this system. The standard TAPs assume the "Owner's Pay" for a very small business covers the owner's own salary for working in the business. But a far more practical and robust approach for a cafe owner is to pay yourself a fixed, market-rate wage.
- Determine your market wage. Be honest. What would you pay a manager to do your job, working your hours? Let's say it's $70,000 per year. That's a weekly wage of $1,346. This is your non-negotiable salary.
- Treat your wage as a real expense. Your wage is a core operating cost of the business. It has to get paid or the business is not successful.
- Don’t pay yourself last. It’s heroic to pay your team first. They are a great asset and should be treated the best. Yet, this is a wrong way to do things. If you can’t pay yourself, that means your business is not sustainable and it means you are also not costing and pricing this the right way.
- This method grounds the system in reality. It ensures you get paid consistently and separates your regular income from the additional profits of the business.
Read The objections (and answers) to raising prices at cafes
The nuts & bolts: Setting up your buckets in Australia
Opening multiple accounts is easier than ever with modern banking solutions.
The implementation process
- Choose your banking solution based on your needs.
- Open the required accounts. You will need your ABN/ACN and personal ID.
- Name each account according to its purpose. Nicknaming your tax account 'The Tax Man', as Scott Pape does, is a powerful psychological trick.²
- Automate your transfers. Set up recurring transfers to enforce the system. You can also use rules within accounting software like Xero, MYOB, or Thriday to help track and reconcile these allocations.
Taming the tax beast: Systematically planning for the ATO
Tax and super are not your money. They are liabilities you hold in trust for others. Your 'Tax' bucket is your shield.²
- GST (goods and services tax): The first transfer from your Income account should be 1/11th of your total revenue. This money was never yours.
- PAYG instalments (your income tax): Prepay your income tax quarterly to avoid a shocking end-of-year bill.⁵
- PAYG withholding (staff income tax): Hold the tax from your staff's wages here until your BAS is due.⁴
Resource: The ATO's free Cash Flow Coaching Kit is an excellent tool for this.
The superannuation 'vault': A critical sixth bucket
Under Australian law, super must be paid at least quarterly.¹⁵ The penalties for getting this wrong are severe.¹⁵
The solution: Create a separate Superannuation savings account. Every pay run, transfer the super you owe from your OpEx account into this vault. It ring-fences the money and stops you from "borrowing" it for a cash flow gap. Our recommendation is to pay it at least monthly.
Planning for the big ticket items
A sustainable business plans for tomorrow's large expenses. The bucket system is perfect for creating dedicated, "sinking funds," a structured savings plan for a known future expense.¹³
The renovation, fit-out and emergencies fund (bucket #7)
A quality fit-out can cost $80,000 to $250,000 and needs a refresh every 5-7 years.⁷,⁸ A smart operator treats the annual depreciation of their assets as a real cash expense. Transfer that amount of cash into a 'Renovation & Capital' bucket each year. When an asset dies, the money to replace it is already there.
We know a cafe whose main oven died mid-service. Their 'Capital Fund' meant they ordered and paid for a new one within hours. No debt, minimal downtime.
The 'make good' minefield (bucket #8)
Buried in most commercial leases is a "make good" clause, a legal obligation to strip the premises back to a bare shell. It can cost tens of thousands.⁹ You must save for this. Create a separate 'Make Good' bucket and contribute to it over the life of your lease.
Resource: Review your lease carefully. Get help from the NSW Small Business Commission or the Queensland Small Business Commissioner.
Read What cafe owners need to know about commercial leases
Conclusion: Your first step to sustainable profitability
Getting control of your cafe's finances won't come from a spreadsheet. It will come from a simple, behaviour-driven system.
Your first step isn't to do all this overnight. Your first step is to take one simple action today.
Open one new, fee-free online savings account. Name it "PROFIT." Set up an automatic transfer to move just 1% of your revenue into this account. This single action is the start of the journey. It's the first step to building the profitable, money-making machine you dreamed of.
Footnotes
1. Michalowicz, M. (2017). Profit First.
2. Pape, S. (2023). The Barefoot Investor.
3. MYOB. (n.d.). Practical steps to boost café profits.
4. Australian Taxation Office. (2024). PAYG withholding.
5. Australian Taxation Office. (2024). PAYG instalments.
6. Australian Taxation Office. (2022). Income tax: effective life of depreciating assets (applicable from 1 July 2022).
7. Profit First Professionals Australia & New Zealand. (n.d.). About.
8. Now Book It. (2025). Restaurant Startup Costs in Australia: Full Guide 2025.
9. Queensland Small Business Commissioner. (n.d.). Make good.
10. Housel, M. (2020). The Psychology of Money.
11. CPA Australia. (2025). Small business essentials.
12. Parkinson, C. N. (1955). Parkinson's Law. The Economist.
13. Thaler, R. H., & Sunstein, C. R. (2008). Nudge: Improving Decisions About Health, Wealth, and Happiness.
14. Australian Mutual Bank. (n.d.). Premier Business Account.
15. Australian Taxation Office. (n.d.). Super for employers.
