Do You Need 5 Different Bank Accounts to Succeed in Business?
In this video, this entrepreneur says she has 5 bank accounts which is what has helped her grow her business. If you know Matt and have watched some of our other videos, you’ll know this isn’t something he recommends. Watch to see what Matt believes is better than the profit first method.
There are tons of people out on social media giving business advice. Some of it is good advice, but most of it isn’t good. In this series watch CapForge’s owner react to different advice videos. He’s an expert in all things business and has 20+ years of experience under his belt. Some of the things he reacts to might even surprise you!
Video Transcript:
Business Advice Video:
There are five bank accounts that I have set up as a six-figure business owner. First bank account is an operating business account. The operating business account is the money that’s coming in and out of your business on a day-to-day basis. The second account is for payouts, even for yourself. No. 3 is gonna be your taxes. You want anywhere between 20 to 25% to go into that account every single month. The fourth account is not mandatory but I do this my business. I have a fourth account for donations. And the fifth and final account is like a miscellaneous account. I call this a team-first account.
Matt’s Review:
She’s not specifically calling this profit first. And maybe this idea didn’t originate for her from the profit first philosophy. But this sounds a lot like what the profit first people coach. Is that you have a whole bunch of bank accounts and you put different amounts of money into each one to ensure that your profits aren’t disappearing on you. The problem with – I think what she’s doing is if you just managed your business well and had good bookkeeping you don’t need five bank accounts. The downside of having a bunch of bank accounts is that you may end up forgetting to move money, like in your payroll account. And then payroll comes due, it comes out of the payroll account, and now it bounces. And now you have employees who didn’t get paid. And now you have, you know, NSF fees and payroll fines and everything else. If you had just let your payroll come out of your main account, then you know as long as the business made enough to pay payroll you’re never gonna bounce your payroll. But also again if you’re keeping track of your number, you’re looking at your profit and loss statement every month, you should know exactly where you’re at without having to set it aside. Also, she said 20 to 25% take out for taxes but what I think she means is 20 to 25% of her profit. Which is a much smaller amount than 20 to 25% of whatever is in the operating account. So you gotta have a good system for tracking how much you’re making and what’s going on with your business anyway just to know what amount to pull aside. So of all the accounts I’d say one for tax savings could be a good idea if you’re the kind of person who’s not good at setting aside money or keeping track of how much you might owe. But it shouldn’t be 20 to 25% of everything that comes in. It should be some percent of the amount that is your profit so you still need good bookkeeping either way. And then a miscellaneous account and donations account. I mean if you wanna make a donation, make a donation. If you wanna have some team building or reinvest in the business, reinvest in the business. You don’t need to put that into a separate account and then pull it back out into the business. Again it all comes back to keeping good records. If you’re keeping good records you don’t need any of this nonsense. And if you’re not keeping good records but you have five bank accounts then you really don’t know how much you need to be putting in each one anyway. You can’t be very successful with one without the other. If you’re gonna only have one, have the bookkeeping.
