Bills Manager and Profit First – an ideal combination!
Starling Bank are increasingly popular, and for good reason!
During the pandemic they were shrewd in accepting new business clients and offering them Bounce Back Loans at a time when other banks weren’t, which gave them a huge surge of new business. The good news is that they apply this foresight to their services too! Their latest announcement of ‘Bills Manager’ is a great addition for anyone who uses the Profit First approach to running their business finances.
For anyone who hasn’t come across Profit First, it’s primarily a way to manage your business finances to ensure the business owner doesn’t get left unpaid while everyone else gets paid! A premise devised by Mike Michalowicz, the concept is simple, but can be really helpful; cash is divided between different bank accounts, depending on its intended purpose.
For example, using the Profit First approach you’d have different bank accounts for Profit, Owners Compensation (what you pay yourself), Taxes and Expenses.
Under the UK bank system and with charges as they are, having multiple bank accounts and the related fees can quickly add up, so Starling’s existing functionality that allows ‘Savings Spaces’ within one business or sole trader bank account is really helpful.
Savings Spaces are custom, visual ‘pots’ within your account, that are ‘shielded’ on your account home screen, so the saved balance isn’t immediately visible.
This alone can make a huge difference to businesses owners! Pop your VAT receipts into a Savings Space and the amount is no longer included in your cash balance, and you have the funds there when you’re due to pay HMRC.
The New Bills Manager takes that principle one step further…
You can now pay Direct Debits and Standing orders straight from a Saving Space. You do not need to move any funds around.
So in the example above, you can transfer your VAT into a Savings Space during the quarter, file the Return when it’s due and the Direct Debit goes out without you needing to do anything.
If you have separate bank accounts, you’d potentially need to move funds from one to the other to ensure it’s in the right place. It’s then tempting to take any remaining balance to ‘top up’ something else.
This way, you don’t need to move anything, so not only do you save time and headspace, but another temptation is avoided too!
You can find out more about Bills Manager here.
Would Profit First work for me?
It’s not for everyone, and takes both discipline and time to get working well, but the basics can be really helpful, particularly for smaller businesses or less experienced owners who manage by the cash in the bank.
If you’d like to know more, we’d suggest the first step to be reading or listening to the book, Profit First by Mike Michalowicz. He’s American, and it’s a bit OTT, but it’s worth persevering if you can! Then we’ll happily chat through how best to implement the theory into your business. We have a number of clients using the Profit First approach, to varying degrees, and it has proved really helpful.
If you’d like to talk about Profit First or any other aspect of your business finance, please get in touch!
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