How to Manage Your Amazon Prime Day Cash: Testing Parkinson’s Law

by Cyndi Thomason

It’s midday on July 15th, 2019: Amazon Prime Day. I’ve checked the forums and see people are reporting 2.5x sales above their average day. If your results are similar, your next payout will get a nice bump. Do you have plans for the extra cash? Make plans now for how you will handle this cash, so you can get the most mileage out of your money.

How to Plan for Prime Day Cash

In keeping with the Profit First methodology, if you leave the funds in your checking account, Parkinson’s Law will take effect and in no time at all the Prime Day money will be spent and you will have very little to show for it. Remember that Parkinson’s Law says, “You use what you got.”

Profit First has shown us that we can overcome this issue by moving our money into bank accounts for specific purposes. For example, when we separate inventory spending from operating expenses in two separate bank accounts, we can easily learn how to protect those inventory funds that accumulate because our spending rhythm is different. When all our money sits in one checking account, it’s hard to separate what will be needed down the road for inventory. We begin to believe we have more money at our disposal than is the case and we then overspend.

Break Free of Parkinson’s Law

Here are some suggested strategies to protect your money and ensure it goes to its best use.

  1. Make sure you replenish your inventory bank account for the Cost of Goods Sold during the settlement period that included Prime Day. This will boost your inventory account for buying Q4 product. 
  2. Allocate to your Profit, Owner’s Pay and Tax accounts at your normal percentages.
  3. Allocate to your Operating Expense account based on a fixed amount. Don’t use your normal Profit First percentage. Your operating expense is unlikely to have any extra expenses because of Prime Day, so we don’t want excess funds to go in the OpEx bank account. I’m sure you can find a better way to use that money that will bring a greater return. Look back over your last three or four allocations to OpEx and use the average or an amount that is in line with these past allocations.
  4. The remaining amount can to into a drip account which will allow us to drip the money as needed into one of the other accounts – Owner Pay, Taxes or OpEx during a slow sales period. Another choice would be to invest the money in future inventory or a new product launch. In which case, you’ll want to move the extra money into your Inventory bank account. Perhaps you’re aggressively trying to pay down debt. If so, move the remaining Prime Day money to your Profit account. When you take your quarterly Profit Distribution, you will have the extra funds to pay down on the debt.

Be Intentional with Your Amazon Prime Day Cash

The main takeaway here is to be intentional with those funds or they will be gone as quickly as they came in, and your big plans will evaporate along with them.

To learn more about Profit First, check out my book Profit First for Ecommerce Sellers where I provide many strategies like this to help you hold onto your profit.

Originally published on July 23, 2019, updated July 23, 2019

This post is accurate as of the date of publication. Some features and information may have changed due to product updates or Amazon policy changes.

Comments