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In this episode
Your business income can go £3k, £5k, £4k, £15k after a good launch, back to £8k, then £5k again, aaaand none of that means your own pay needs to perform the same little dance.
In Episode 1, I explained why a set, consistent owner’s pay gives your business a real financial benchmark and gives your personal life some predictability, but the obvious question is, how the hell are you meant to do that when the money entering the business changes every month?
The answer is the Overflow Formula, a simple cashflow system using:
- One main account for money coming in and going out
- One tax pot
- One overflow pot
That can mean three separate accounts if that works for you, or, with modern digital banking, it can all live inside one banking app.
You do not need five billion business bank accounts
Hello, hello, welcome back.
Today we’re talking about how to manage your business finances from one bank account, and yes, I know my own clients may be laughing already because I am usually the woman who loves a three-account system.
But those three jobs do not necessarily require three entirely separate banking relationships, three cards and a minor administrative degree. If your bank lets you create pots or spaces inside one app, the whole system can be managed in one place.
It might not work in precisely the same way for everyone, because banking features and availability differ by country, business structure and provider, but the principle is simple, you need somewhere for everyday business cashflow, somewhere for tax, and somewhere for overflow.
And that structure is what allows you to keep paying yourself consistently when the revenue itself is not consistent.
Why consistent pay needs a cashflow system underneath it
In Episode 1, we looked at why you should pay yourself a set amount rather than making random transfers whenever you need money.
There were two main reasons.
First, your owner’s pay gives the business a benchmark. Once you know what needs to reach your personal account, you can reverse-engineer your revenue goal, offers, sales activity and marketing around it, because honestly, every part of your business strategy eventually comes back to what the business needs to produce.
Second, consistency gives you more predictability, not only in the business but in your actual life. You can cover your expenses, make decisions beyond the next bill and use more of your brain for big-picture thinking, rather than spending every month trying to work out whether this is the week everything falls apart.
But then we arrive at the problem business owners always bring me:
“Okay, but how do I pay myself consistently when my income is up and down?”
Maybe the business makes £3k, then £5k, then £4k. Maybe it makes £5k for three months, has a £15k launch, drops to £8k, then goes back to £5k again. I’m getting into a real rhythm imagining numbers here, she’s the money girl, focus, focus, focus.
The point is that variable revenue is normal, so the system needs to use the stronger months to support the quieter ones, rather than passing every fluctuation directly into your personal account.
Why I do not use Profit First
Profit First, created by Mike Michalowicz, is built around an important idea, profit should not be whatever accidentally remains once the business has spent everything else.
I like that shift. The system helps plenty of business owners manage their money better, and I am not pretending the entire thing is useless because I enjoy being contrary on the internet.
But I bought and read the book specifically because I wanted to understand the system properly, and there are parts I fundamentally disagree with.
The first is the suggestion that, if you do not know where to start, you can begin by allocating 1% to profit.
One percent? No. That is not a profitable business.
It might be a starting behaviour, but it does not make the economics healthy, and I do not want someone to create five beautifully labelled bank accounts and believe the structure itself has solved the problem.
The second issue is the number of accounts. The standard Profit First setup uses five core accounts:
- Income
- Operating expenses
- Owner’s pay
- Tax
- Profit
Revenue lands in the income account, then gets split by percentage into the other accounts, usually through a twice-monthly allocation rhythm.
And I’ll do you one better, you do not need five, you need three jobs at most, you can run them inside one banking app, and once the system is working you can do the main payday movement once a month.
Sounds better. Done it.
Your expenses are bills, not percentages
One of my biggest problems with percentage-led cashflow systems is treating operating expenses as though they naturally expand and contract with revenue.
My expenses are not a percentage of my revenue. The bill is my bill.
Your VA does not invoice you for 10% of whatever you happened to make this month. They send you an invoice for the work you agreed, your software subscription costs what it costs, your insurance costs what it costs, and pretending those expenses are simply a neat percentage can hide whether the actual numbers make sense.
It can also leave people constantly emptying accounts during a growth period. Money arrives, a percentage is moved here, another percentage goes there, the operating account is drained down again, and you are technically following the system while still feeling as though the business is one invoice away from disaster.
That matters, because as we covered in Episode 1, it is extremely difficult to grow sustainably while every financial decision is being made from scarcity and panic.
A structure is not useful because it contains lots of pots, it is useful because it tells you what the money needs to do.
The Overflow Formula
I stumbled across the foundation of what became the Overflow Formula while researching money-management methods for business owners. At that point I had already been a financial educator for around four years, and I had taught a similar system to personal-finance clients, so the business version only needed a few changes to reflect business cashflow.
At its core, it is a three-account system:
- Your main account
- Your tax account or pot
- Your overflow account or pot
You can use three separate accounts, but banks such as Monzo, Starling and Mettle offer different versions of pots or savings spaces, which means you may be able to create the separation inside one app. Chase was also mentioned in the original recording as a general digital-banking example, although its products and suitability will depend on what is currently available to you.
The bank is not the method. The three jobs are the method.
Account one: your main business account
Your main account is where all the business income lands, whether it arrives through Stripe, PayPal, bank transfer, an invoice or another payment provider.
It is also where normal business spending leaves, subscriptions, invoices, operating expenses and, once we get to payday, your owner’s pay.
I do not separate income and everyday operating expenses into different current accounts, because moving money from an income account to an expenses account adds another step without improving the decision. I need to know what has come in, what is due to go out, and what remains available after those commitments.
Account two: your tax pot
The tax pot is the only part of this system where I use a percentage, because tax itself is calculated using percentages.
The right amount depends on where you live, how the business is structured, your profit, other income and the taxes that apply to you, so this is a question for your accountant, not a number to copy from somebody’s Instagram post.
One useful starting point is to look at your previous tax returns and calculate what the tax bill represented as a percentage of the business revenue, then use that history to inform what you reserve going forward.
And no, we are not doing the mental maths, calculators exist, spreadsheets exist, use them.
At the time of recording, my previous tax bills had been around 6% or 7% of revenue, but I deliberately moved 15% of every payment into my tax pot. Whether £10 or £1,000 arrived, 15% was moved automatically, because I preferred to build a margin rather than worry about being short when the bill arrived.
That was my historical percentage, based on my circumstances at the time, not a recommendation for yours. If you are approaching VAT registration, moving between tax bands or changing business structure, the calculation may change significantly, so please speak to your accountant and use current figures.
Account three: your overflow
Overflow is where the stronger months begin supporting the quieter ones.
First, choose a payday. I generally prefer the first or last day of the month because it makes the accounting easier to follow, although you might choose the day your personal bills leave, or the day immediately before.
Then calculate what I called the magic number in the original episode:
Owner’s pay + average monthly business expenses = the amount the main account needs to hold on payday.
If you use a cashflow tracker and know the exact expenses due during the next month, you can use the projected figure rather than an average. The point is to know what needs to remain in the main account before moving anything elsewhere.
Let’s use the same numbers from the episode:
- Owner’s pay: £2,000
- Average monthly business expenses: £1,000
- Magic number: £3,000
If I open the business account on payday and there is exactly £3,000, I pay myself £2,000, leave £1,000 for business expenses, cushty, move on with my life.
Now imagine I open it on 31 July after a good launch and there is £5,000 sitting there.
My owner’s pay is still £2,000, and for the love of God, I am not paying myself more simply because one month was good. I transfer the agreed £2,000 to myself, leave the £1,000 required for expenses, then move the extra £2,000 into overflow.
August arrives, a couple of payment plans end, sales are quieter, and on payday there is only £1,000 in the main account.
Instead of being up Schitt’s Creek, I bring the £2,000 saved in overflow back into the main account, which restores the £3,000 magic number. My £2,000 pay still happens, the £1,000 for expenses remains available, and the tax money has already been protected separately.
July’s surplus has absorbed August’s shortfall.
Over time, the aim is for the overflow to grow, so the business can keep doing its job when normal life happens, clients finish, payment plans change, you take time off, a launch underperforms or sales simply arrive in a lumpier pattern than the internet promised.
Being good with money does not mean never overspending
This is where the episode wandered into a slight tangent, but it matters.
You do not complete money. You do not finally become a person who is officially “good with money” and never makes another imperfect decision, I was trained as a financial adviser, I spent years as a financial educator, and I still overspend sometimes.
Financial education is part of it, but knowing the technical details of interest rates or having lots of cash under the mattress is not the same thing as knowing what you want your money to do.
When I first started money coaching, I would ask clients what all of this was for, and what they were most afraid of financially. Almost everybody said they were scared of running out, or scared there would never be enough.
Then I would ask, “What does enough actually look like?”
And roughly nine out of ten were much closer than they thought. Enough might have meant working on their own terms, owning a home, or reaching a savings goal that was achievable within a couple of years, but until we named it, the fear had no finish line.
If you do not know what you want from your money, there will never be enough money.
The key is knowing what you want to buy and why you want to buy it. I’ll say that again, the key is knowing what you want to buy and why you want to buy it.
The key is not scrimping and saving. The key is not having six figures sitting untouched. The key is not growing the business to a million because that sounds like the next respectable number.
The key is living the life you actually want, and knowing how to use money to pay for it.
That is what the tax pot and overflow are for too, they are not gold stars for being financially responsible, they give the money a job and make the life you’re building less vulnerable to whichever month happened to be quieter.
What if there is not enough, and overflow is empty?
Now, I know somebody is thinking, “Fantastic, but what happens when there is not enough in the main account, and nothing in overflow either?”
Fantastic question.
First, the shortfall is information. It does not mean you are bad with money, it means the business has a problem to solve.
Look at the sales side first. Are there hot leads waiting for a follow-up? Is somebody already on the edge of buying? Could you invite people into sales conversations, follow up in the DMs or make a clear offer to close the gap within the next few days?
If the money cannot be generated in time, you may need to pay yourself less temporarily. Temporarily is doing a lot of work in that sentence, because routinely sacrificing your pay is not the system.
Say your core personal bills are £1,000, but you normally pay yourself £2,000 because the other £1,000 includes joyful spending and savings goals. I do not love cutting every enjoyable thing, because restriction can create the exact “fuck it” response that sends spending in the opposite direction, but you might pause £500 of savings for one month and reduce the transfer without losing everything that makes your life feel like yours.
You can also check whether the tax pot is carrying more than the business currently needs, but only when you understand the actual liability, not because the main account looks sad and the tax pot looks temptingly healthy.
Other options might include personal savings or debt.
Yes, I was the money coach who would tell somebody that debt can be used as a tool. Debt costs money, it carries risk, and if you have a history of overspending or repeatedly relying on borrowing without a repayment plan, it may be entirely the wrong tool for you.
But cashflow variation is part of business, and borrowing with a clear purpose and repayment plan is different from using debt indefinitely because the underlying numbers do not work. The repayment plan may take a year, it does not need to mean clearing the balance next month, but there needs to be a plan.
I would also rather see somebody build a small amount of savings and overflow while repaying debt, instead of throwing every available pound at the balance, leaving no buffer, then putting the next broken appliance or quiet month straight back onto the card.
And I am at risk of going on a full debt rant, which is not what this episode is about, so, back to the point.
You need one banking app, not one undivided pile of money
The headline says one account, but the separation still matters.
You need:
- A main account for income and operating expenses
- A tax pot, funded using a percentage appropriate to your circumstances
- An overflow pot, holding anything above the amount required for owner’s pay and expenses
On payday, pay yourself the agreed amount, leave the money required for expenses, move any genuine surplus into overflow, and pull from overflow when a quieter month cannot support the magic number.
You can build those three jobs using separate accounts, or spaces and pots inside one digital banking app, whichever is available and makes the system easiest for you to understand.
The original episode ended with me telling people to stop paying for business banking when free options existed. I would make that less absolute now, because banking features, eligibility and the value of paid plans differ, but I would still ask whether you understand what you are paying for.
At the time, I was using Mettle by NatWest, which offered a free business account and access to FreeAgent. That arrangement still exists at the time of updating, subject to eligibility and usage conditions, but products change, so check the current terms rather than choosing a bank because I mentioned it in an old podcast.
What matters is not finding The Correct Bank Account™.
What matters is creating a cashflow system you can read, using it consistently, and knowing what the money is meant to do before you move it.
Resources mentioned
- Episode 1: Why business owners should pay themselves consistently
- Profit First resources from Mike Michalowicz
- Mettle by NatWest
- Monzo Business savings pots
- Business and revenue-planning resources
The other banks mentioned in the recording were Starling and Chase. Their products, fees and pot features change, so compare the current options directly before opening or switching an account.
Continue listening
In Episode 3, we take the next step, how to calculate your owner’s pay, choose a payday and start transferring it consistently.
Want a cashflow system built around your actual business?
Moving money between three pots will not fix an offer that cannot generate the revenue you need, and selling more will not fix a business that has no plan for what happens after the money lands, because those are two halves of the same problem.
Inside Momentum, we work on both, the revenue goal, offer, pricing and sales system creating the money, then the cashflow structure that turns it into consistent owner’s pay.
Apply for Momentum, and we’ll build the system around your numbers, your capacity and the life the business is supposed to fund.
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