Profit First requires the setting up of a number of different bank accounts in order to allocate cash received. This can present a challenge owing to the monthly fee most UK banks charge for using their accounts. One of the principles of Profit First is frugality, so if a bank charges £5/ month and you have 5 accounts, that’s a bill of £300 a year and one we’d rather avoid.
Our view is that this matters, regardless of how profitable you are. The £10’s matter. The £1’s matter. And in our experience is that the high street banks, are fantastically unhelpful here. So we need a better solution.
That said, we recommend keeping a high street bank as your second bank (for your Tax and Profit Hold accounts). The Coronavirus support has been much more accessible from high street banks (with the challenger banks struggling to provide Bounce Bank Loans and Coronavirus Business Interruption Loans). So it seems advisable to maintain these links at least for the foreseeable future.
The UK banking market has seen a renaissance in recent years, and here is our chart of the best banks for Profit First. Please note, these are our honestly held opinions and we’re don’t receive any commission for recommending any bank. Also, these accounts only offer limited service compared to high street banks. You’ll be saying goodbye to your credit cards and overdrafts as a user of Profit First anyway, so this shouldn’t present a problem.
Charges: £5 per month per account.
We like Monzo – we use it ourselves. The bank was launched as a consumer bank and it features ‘pots’ within the account, so cash can be hypothecated to various needs. When they launched a business bank account the same feature was added.
When you log in, you see the different pots as if they were separate bank accounts. As such you only need one account.
We like the auto sweep function on the tax account, which replicates the allocation of funds just as Profit First requires.
We also like the good foreign currency rates, with no additional fees. Unlike high street banks who tend to charge twice, once with a sub-standard conversion rate, and then again with a for-ex fee. Hmm.
And of course it links to Xero. (The free version doesn’t, but the £5 per month version does).
We’ve found the app can freeze occasionally (or maybe our phones are getting old? – second hand iPhone X anyone?)
Runner up: Tide
Tide don’t charge a monthly fee, and their app gets great feedback. They instead charge for the number of transactions.
Setting up accounts is dead easy. However they limit you to 4 accounts which is a bit frustrating. They need to be offering 7 or 8 really in order for Profit First advanced users.
Charges: £5 per month
As a Revolut Partner, we can set up business accounts on behalf of our clients. This is a neat function and we like it for that, however there remains the costs of £5 per month for the accounts. Clients who use Revolut however speak highly of it.
Again, Starling don’t charge a monthly fee and instead charge per transaction.
However you can only have one account with them which rather limits their uses for Profit First users.
A word of warning:
Some users of the system try to avoid the multiple accounts step, and instead use a spreadsheet or set up multiple accounts in their accounts software. This is a mistake. The spreadsheet and accounting software will always be a day or two behind your bank owing to the need to reconcile transactions. And that’s if you’re on it, all the time. This time lapse creates a grey area of uncertainty and the discipline necessary for Profit First to work can’t take root. Bank accounts are instead a real time temperature check of your business, when used in conjunction with the Profit First method.