Pots & Spaces Without a Framework
Lots of business owners are using banking “pots” and “spaces” to organise their money, setting aside funds for tax, profit, or future expenses.
But here’s the big question:
Is separating money enough… or are we missing something?
In this episode, Tim Seymour and Deb Halliday explore why simply creating pots without a structured financial framework can actually create confusion, misallocation, and a false sense of control.
They unpack:
- Why putting money aside isn’t the same as having a strategy
- The risks of allocating funds without understanding your true financial position
- The importance of a proper profit assessment before deciding percentages
- How Parkinson’s Law quietly sabotages business owners
- Why discipline and structure matter more than ever
You’ll hear why the real power doesn’t come from the pots themselves, it comes from the framework guiding them.
If you’ve embraced app-based banking features but haven’t fully implemented a structured cash flow methodology, this conversation will challenge your thinking and help you see what might be missing.
Transcript
Foreign.
Speaker B:Welcome to Profit first beyond the Book, a podcast that takes you beyond the book with Profit first brought to you by Tim Seymour and the rest of the Profit First Professionals UK and Ireland team.
Speaker B:And welcome to another episode of Profit first beyond the Book where we're going to discuss pots and spaces without a framework.
Speaker B:Thanks for joining me once again.
Speaker A:Deb Hi Tim, nice to be here once again.
Speaker B:Good to have you on again, regular guest, obviously, almost co host of Profit first beyond the Book.
Speaker B:So I appreciate you spending the time to join with me once again on our podcast.
Speaker B:I wanted to discuss about pots and spaces without a framework because we all know now nowadays we've got the the app based bank account.
Speaker B:So Monzo Starlin are the obvious ones metal and a few other ones that we could go through and name them all.
Speaker B:And of course they have what they call pots and spaces in the background.
Speaker B:So you have your main bank account, then you have some pots and spaces where you can move money in to move it aside so you don't spend it and you can create some kind of savings.
Speaker B:Pots going on in the background.
Speaker B:And what I've seen quite a lot recently is people, accountants and bookkeepers that are clearly talking slightly about profit first, I would say, and suggesting that people open up these pots for various reasons, pay yourself more, put money aside for tax, VAT or maybe put some money aside for your profit.
Speaker B:And of course to us we know that that is profit first.
Speaker B:But trying to put money into pots and spaces without the framework of profit first is not actually as easy as it may seem because there's no structure.
Speaker B:So would you say that's about right there from your perspective as well?
Speaker A:Yeah, I would.
Speaker A:Because if you don't have a profit first framework and you're only using maybe one or two pots, then if you haven't done an instant assessment, you don't know whether there's enough money to actually cover all the other aspects.
Speaker A:So you might be saving for tax or you might be saving and putting your VAT aside, bid away for profit.
Speaker A:But how much it the business owner still doesn't know how much is left for them to take out of the business or to spend on operating expenses.
Speaker A:So this piece is missing and although gives peace of mind initially, it still doesn't address the business as a whole.
Speaker B:Yeah, we're not saying putting money aside is wrong, by the way.
Speaker B:Of course putting money aside is.
Speaker B:And save him for certain things in the future is the right thing to do.
Speaker B:Absolutely.
Speaker B:But it's very difficult to know if you're a business owner, what you should be putting into these pots and how much and how frequently.
Speaker B:Whereas with profit first, when you start off with profit first and as a profit first professional and even profit first professionals go through this learning, you run the instant or the profit assessment and that tells us and tells you how you've been using cash up to that moment in time.
Speaker B:So that is kind of your starting point on what your allocations have been, if you would make an allocations.
Speaker B:So it's looking at it from a profit first perspective, completely from there we then help you build a rollout plan and the rollout plan will tell you how much percentages you put aside from the money coming into your business for the certain profit first parts.
Speaker B:So obviously we're going to talk about VAT and obviously it's then going to be profit owners pay tax and what's left?
Speaker B:And this is the key point, what's left you run your business on.
Speaker B:So that's what goes into your operating expenses.
Speaker B:And I think that's the key bit that gets left out, Deb, because the whole point of the whole methodology of profit first from Mike's initial thought process of how profit first operates is that yes, you take your profit first, but the ideology is you move your money aside for different purposes strategically.
Speaker B:And what's left is what you spend on your business.
Speaker B:That's what you're allowed to run your business on, which then makes you look at your expenses in a different way, you know, and you start to think about returns on investment and you also start to think about how you can be more innovative with what you have got to be able to still provide the service or the product that you're providing to your customers.
Speaker B:And I think that bit is the bit that gets forgotten quite often when we talk about profit first.
Speaker A:It is, yeah.
Speaker A:I would say a lot of the time if you've got all your money in one pot and you haven't built the framework where you only try and run your business on what's left on the operating expenses.
Speaker A:It seems like an ever end, never ending fountain if you like.
Speaker A:It'll, it'll bubble up because when you put your income in there, but it then it'll go down.
Speaker A:But you constantly thinking, I've got more coming, I've got more coming.
Speaker A:So you end up overspending because you know you've got more coming.
Speaker A:But you should actually have use that as a budget.
Speaker A:Parkinson's Law at the end of the day, isn't it?
Speaker B:Yeah, yeah.
Speaker B:And, and Parkinson's Law for, for anyone who, who's not aware of what, when we say pockets of what that means.
Speaker B:It's, it's a sort of concept that relates to time and money and it's easy to explain if you explain it from a time perspective.
Speaker B:So say you had a project that you needed to complete and you had until the, I don't know, the 31st of May to complete it.
Speaker B:You would work out how much time you need to spend on that to get that project done and you would either do a little bit each week or you would wait until the end and you would complete it just before the 31st of May.
Speaker B:Whereas if you were told the same project would need completing, but it would need need completing by the, I don't know, the 31st of March, you would get it complete by the 31st of March.
Speaker B:So we will, we will use the amount of time we have to complete the task we need to achieve by that deadline.
Speaker B:Funnily enough, self assessment tax return deadlines spring to mind whenever I talk about this because I always think how many clients of our accountancy and bookkeeper friends leave everything until January because they've had all that time and it's not due until the end of January, so they leave it to the last minute, hence causing themselves a problem.
Speaker B:As we know, the same happens with money.
Speaker B:When we've got money in a bank account, we will use all of that money up.
Speaker B:So the easiest way to explain this from my perspective is when you're employed, you get paid a salary.
Speaker B:You get the same amount every month.
Speaker B:It gets paid in say, the last working day of the month.
Speaker B:And so you, you're waiting for that payday to come around.
Speaker B:Once that payday comes, you pay for what you have to pay for whatever's left you use up before the next payday comes because you're consuming the amount of money that you've got to live on.
Speaker B:And it's the, the saying is we live to our means.
Speaker B:And that's what that means.
Speaker B:We live to our means because we live, we live to the money we have available.
Speaker B:And so that's, that's how I can explain what Parkinson's Law is.
Speaker B:So from a, from the profit first perspective, what we're saying is if we remove money from your current account and move it into profit pots, into tax pots, into owners paid top parts, into VAT pots, you're squeezing and having less money to run the business on, but you will find a way to still run your business on that lesser amount of money.
Speaker B:And that's Parkinson's Law working in your favor.
Speaker B:So I think I've got everything there and I just wanted to explain that because it is very relevant to why profit first and the whole framework works as opposed to just putting money into some pots or just popping some money into a savings account and thinking you're running profit first.
Speaker B:It's completely different, isn't it?
Speaker A:Yeah.
Speaker A:I would even go as far as to say we working towards an optimal business as well.
Speaker A:So the pots don't stay the same throughout the year.
Speaker A:They are optimized.
Speaker A:So if you are not paying yourself currently enough, we tweak the pots, don't we?
Speaker A:So that actually if you're overspending on opex, we can take a percentage or two off of OPEX and put it into owner's pay.
Speaker A:And likewise for tax or profit, it grows and makes you look at the health of your business on a constant basis.
Speaker A:You're always striving to make it more and more healthy.
Speaker A:Yeah, so it's, it is a, it's a framework, but it's also a, a roadmap.
Speaker A:It's, it's a target to aim for.
Speaker A:So yeah, it's not just putting money into pots.
Speaker B:No.
Speaker B:And it's very easy for people to read the book and come away with that assumption sometimes, but they're missing the whole behavioral aspect behind it, which partly is Parkinson's Law, partly is building up habits, creating rhythms with your money and creating a discipline that you didn't have before.
Speaker B:And I think with that it shifts your mindset.
Speaker B:Because for me, and I've shared this on numerous occasions, but when I first implemented profit first, I chose the same time, the same day every week.
Speaker B:And for me that's Fridays, nine o'.
Speaker A:Clock.
Speaker B:And that was when I do my allocations full stop, non negotiable, apart from when I was running crosses and coffee.
Speaker B:And I used to have to do it at quarter to nine because we were going on to the call at nine o', clock, by the way.
Speaker B:So just for anyone who's on crosses and coffee.
Speaker B:Yeah, okay.
Speaker B:I did it 10 minutes earlier.
Speaker B:But the principle was before my working day started, I always did my allocations and I still live to that, to that habit.
Speaker B:Now you don't necessarily do that if you've just opened up a Monzo account or a Stalin account and opened up some pots or spaces and called them even if you call them the exact profit first accounts, if there's no framework and no, no source of the allocations, the amount of monies that you need to put into these, these areas, you're never going to make it work.
Speaker B:It's just a case of you might put a thousand pound in here, you might put a thousand pound in there and then you'll forget and then you'll, then you'll need the money for something else.
Speaker B:So you'll take 500 out because you need to buy something, you know, you decided to do another training program or, or you've seen something on, on a Black Friday deal that you want to buy and you've been waiting to buy it.
Speaker B:So you take the money out there because it's there.
Speaker B:Why wouldn't you?
Speaker B:Before you know it, there's nothing left in the pots because there's no framework behind, there's no discipline created, there's no habits created, there's no behavior change.
Speaker B:So you're still robbing Peter to pay Paul all the time.
Speaker B:It's just the fact that you've labeled them in different parts.
Speaker B:Whereas when you're running profit first properly in your business, and especially when you've got a profit first, professional holding you accountable, you can overcome the bumps in the road.
Speaker B:So when you get that impulse to buy something to £500, say you're going to look at your operating expense account, you're going to think, yeah, I've not got that money in there at the moment and I know I've got some bills coming out, I've got to do my allocations on Friday at 9 o'.
Speaker B:Clock, I'm going to hold off on buying that.
Speaker B:Going to wait, I'm going to, I'm going to wait.
Speaker B:And quite often, or not, the waiting bit actually tells you you don't actually need it.
Speaker B:It's just an emotional impulse buy, isn't it?
Speaker B:So we're stepping away from those decisions and we're making a more informed decision because we're looking at our bank account and we haven't got the money.
Speaker B:Whereas before profit first, you might see there's £5,000 in the bank, so you might think spending 500, no problem.
Speaker B:But what happens then is a week later you've got the salaries to pay, you know, you've got to pay a couple of supplier bills and suddenly the money is disappearing.
Speaker B:Maybe vats due as well at the end of the quarter and you haven't even paid yourself.
Speaker B:So just putting money into pots and spaces does not necessarily mean you are following a framework.
Speaker B:And I feel it's really important to get this point across.
Speaker B:What, what do you say to all of that, Deb?
Speaker B:I've probably chucked a lot of information out there in one.
Speaker A:I, I agree.
Speaker A:I think it's behavioral, it's discipline.
Speaker A:But we also reward ourselves for the discipline with the quarterly profit distribution, don't we?
Speaker A:So we're removing the, as you say that, that emotional wanting to buy something immediately, but actually we're just deferring it to when we pay ourselves the profit distribution.
Speaker A:So it means that we're, we're better informed by that point.
Speaker A:Do we actually need it?
Speaker A:Was it a win?
Speaker A:Was it a, was it just a want to have rather than a need to have?
Speaker A:But yeah, we do.
Speaker A:We certainly reward ourselves.
Speaker A:So it's not all about tightening the belts and being frugal and being misery.
Speaker A:It's we, I can't even say it.
Speaker A:Reward ourselves every quarter and who doesn't, who doesn't enjoy a bonus every quarter?
Speaker A:So, yeah, I do.
Speaker B:Absolutely.
Speaker B:Spot on.
Speaker B:It's a great point to make.
Speaker B:I hadn't made that point either.
Speaker B:So well done.
Speaker B:And, and, well, I'll share with you.
Speaker B:We were talking about this before we came on air, that I just renewed my laptop and bought a new laptop.
Speaker B:Well, what I didn't tell you, but I will share with everybody is that I bought that the first week of January.
Speaker B:And the reason I bought it the first week of January is because I bought it from my profit part that I, I was able to take at the end of December because that's the end of the profit first quarter.
Speaker B:So I, I took the money out and I decided, what do I want to do with it?
Speaker B:And I needed the laptop, so I bought myself a laptop, you know, simple as that.
Speaker B:And that, that is the whole process of profit first in action.
Speaker B:That's exactly how profit first works.
Speaker B:Did I need a laptop a month or two before?
Speaker B:Yes, probably.
Speaker B:But I held off and held off and held off.
Speaker B:I'm honest, I probably held off for over a year before I bought the laptop.
Speaker B:Because profit first does make you be, it makes you act a little bit more frugally, it makes you a little bit more careful, but it also makes you think, do I really need it?
Speaker B:Can I manage as I am?
Speaker B:And then when the managing as I am got to a point where, yeah, we need to do something about this now, that was when I decided, okay, okay, time to buy.
Speaker B:Time to buy the laptop.
Speaker B:Next time I get my profit reward, that's what I'm going to do.
Speaker B:So really, really important point to make that Deb.
Speaker B:So thanks for sharing that.
Speaker B:The, the other side to this is we with profit first.
Speaker B:We're very clear that every plan that comes into the business should have a purpose, aren't we?
Speaker A:Yeah, it's spending with intention, isn't it?
Speaker B:Yeah.
Speaker B:And, and, and I think that's a really key aspect as well, because so much money moves in and out of our business that without a framework, we don't necessarily have control or clarity on.
Speaker B:So having that framework, having that discipline and actually looking after every single pound and saying, you know, my income's come in, this percentage is going into profit, this percentage is going into tax, this percentage is going towards paying myself, this percentage may be going towards paying my team.
Speaker B:And then what's left, I have left to run the rest of the expenses in the business outside of my team.
Speaker B:Because we are quite keen to help people that have a team to have that as a separate pot, which isn't written about in the book, but obviously it's something that we would do and I know you've done yourself and you would do with your clients, wouldn't you, Deb, in the past?
Speaker A:Yeah, it's all about removing the stress, isn't it?
Speaker A:So, and meeting payroll is one of those stress stressors, really.
Speaker A:So having a separate pot for payroll or subcontractors, however you pay your team is vital, I think, just for lowering those shoulders and not those three A.
Speaker A:Stopping those three a.m. sitting up in panic in the middle of the night thinking how I got enough to cover the salaries of the team.
Speaker A:So, yeah, it's all about removing the stress.
Speaker A:So the more clear you can be, the, the more stress free your finances.
Speaker A:It also allows you to optimize your systems.
Speaker A:So if you, you've got a clear idea of your cash flow, what's coming in and what's going out for various different categories, then if you've got, say, a bad payer, an age debtor, you can maybe tighten up your credit control or you ask suppliers if you can move the payment date to a particular day of the week.
Speaker A:Or you can decide, you know, oh, I'm going to pay this on a Thursday, so that might be your allocation day.
Speaker A:So you just inform all your suppliers, I'm going to.
Speaker A:Payment days are on Thursday and then they don't, they stop chasing you because they get used to your rhythm, which, yeah, I think just removes the stress of, of cash flow.
Speaker B:Yeah, without doubt, without doubt.
Speaker B:And so we get a lot of people come to us that have tried to implement profit first in their own business, perhaps have read the book, they've gone down the route of opening some pots and spaces and, and they get a little bit stuck and so they, they reach out to us and they asked to be put in contact with Profit First Professionals.
Speaker B:And so we match them up with the, the, the best match, as it were.
Speaker B:I guess, I guess I'm the matchmaker in that way.
Speaker B:So who fits with who?
Speaker B:You know, what type of business is it, what sort of help are they looking for?
Speaker B:And then I try and, you know, introduce them to the Profit first fester that I feel would suit, you know, would suit them best.
Speaker B:So if you are a business owner and you're listening to this and you're using pots and spaces, then well done.
Speaker B:You've made a great first step into trying to gain control and get more clarity on the financial aspects of the business and your cash.
Speaker B:I would encourage you to go to our website, profitfirstuk.co.uk you'll be able to see some of our, most of our, but not all of our members are on there, so you'll be able to see some of our members individually.
Speaker B:You'll better reach out to them, check their websites out, hit their links, contact them directly if you want to, or you can fill out the form on the website that will come through to me.
Speaker B:Just saying that you want some help with Profit first within your business.
Speaker B:Give me as much information as you can and I'll be able to match you up with a Profit First Professional.
Speaker B:So that, that's kind of the first thing we can do to help.
Speaker B:If you're an accountant and a bookkeeper and you're talking about pots and spaces and I see quite a lot of you on Instagram doing this, by the way.
Speaker B:And do you know what?
Speaker B:This isn't a judgment.
Speaker B:This is actually, I'm glad you are, I'm glad you're talking about it.
Speaker B:It's the right things to be talking about without a shadow of a doubt.
Speaker B:So don't think of this as me calling you out.
Speaker B:It's not the case.
Speaker B:I'm glad you're talking about pots and spaces.
Speaker B:I'm glad you might even be using some of the terms of Profit first behind the scenes about it all, you might be helping clients with Profit first as well.
Speaker B:Please reach out to us because I would suggest you will learn a lot more if you come through Profit First Professionals for start, you'll be fully licensed, which is obviously a legality.
Speaker B:So you shouldn't really be offering Profit first without being a licensed Profit First Professional.
Speaker B:But if you are, it means you want to do it, you want to do the right things.
Speaker B:By your clients and you're looking to create that high value advisory offer, we can guide you through that whole process at Profit First Professionals.
Speaker B:So go to profitfirstuk.co.uk have a look at the wait list, just fill your details in it, come through to me, I'll reach out to you, we can schedule a call, we can have a conversation, simple as that, and then we can go from there.
Speaker B:If you're the right fit to join us, fantastic.
Speaker B:If you're not, then maybe you come to the Profit first pathway and you could be in our pre membership group where we will try and guide you through some of the steps of, of Profit first in your own business before you're ready for us to help you work with your clients.
Speaker B:So if you're ready to just come into that group, go onto Facebook, search up the Profit first pathway and you'll see myself there, you'll see Deb and you'll see Jason and we'll be ready to welcome you into our group where we just keep people up to date with what's happening with Profit First.
Speaker B:There's no kind of hard sales in there.
Speaker B:The idea everybody likes Profit first and they're looking to perhaps eventually become a Profit First Professional.
Speaker B:So come along, join your peers, talk about Profit first, find out more about the whole strategy and the framework and see where that will take you.
Speaker B:And the last thing I'm going to share with you, I'm sharing a lot now, Deb.
Speaker B:I'm on a roll.
Speaker B:The last thing I'm going to share with you is you could.
Speaker B:If you are running Profit first new business, if you're not sure whether you're running Profit first or not, if you've got some pots and some savings but you're not really 100% certain what's going on, you could go to do our Profit first quiz.
Speaker B:Now, you answer 20 simple questions.
Speaker B:It will literally take two minutes on average.
Speaker B:The average, average time it takes people to complete is just over two minutes.
Speaker B:So make yourself a coffee.
Speaker B:By the time you've had two sips, you probably answered all the questions.
Speaker B:So if you go there, this will tell you where we measure you from our Profit first perspective and through our Profit first eyes of where you are from the answers you've provided and it gives you the next steps you can take.
Speaker B:Now, that might direct you to the Profit first pathway, it might direct you straight to Profit First Professionals, but it gives you opportunities and gives you an idea of where you're at.
Speaker B:So if you want to take a simple step which doesn't mean committing to being in our world straight away.
Speaker B:You can just go and do the Profit first quiz.
Speaker B:And to do that, you go to Profit first assessment.
Speaker B:ScoreApp.com going to read that again because that was a bit of a mouthful.
Speaker B:So profit first assessment.scoreapp.com and you recognize ScoreApp because it's one of Daniel Priestley's amazing tools that we love to use and love to support at Profit First Professionals.
Speaker B:So I think I've got everything covered.
Speaker B:Deb, have I missed anything out?
Speaker B:Is there anything you want to add on that I've forgotten to talk about, or are we all good?
Speaker A:No, I think we're all good, Tim.
Speaker A:Yeah, all good.
Speaker B:Excellent.
Speaker B:Well, thank you once again for joining me and thanks for.
Speaker B:Thanks for listening in and for viewing and we'll be.
Speaker B:We'll be back with another episode next week.
Speaker B:Thanks for joining us.
Speaker B:Thank you for joining us on our podcast today.
Speaker B:Profit first beyond the Book was brought to you by the Profit First Professionals UK and Ireland team.
Speaker B:If you'd like to find out more about Profit first or becoming a Profit First Professional, head to our website, profit first uk.co.uk.
