Why online banks could present a danger to your business

What's the problem with Starling and Monzo accounts and how could they be harming your business?

I see this issue a lot, and it never used to be a problem.

Back in the day your bank was for storing money and you used your bank statement for reference.

Ideally importing the statement to Xero (automatically) and then using Xero to analyse your profit (or loss), your cash flow and your net asset position.

You can then also run off performance reports with KPIs in to see if you are on track (Key Performance Indicators).


Starling and Monzo both offer account insights which they infer are like accounting reports.

They are not!

They simply tell you how much cash has come in and gone out of your business. They don't give you any indication if:

The money was a loan not income
The money was a purchase of shares or a refund

The expenses were asset purchases therefore not costs.
And so on.

It's so dangerous to try and run your business from a bank statement please please stop doing it if you are.

If you aren't and you're already using Xero with an external finance team then good on you!

One example of this is a prospective client who had income 200k below their expectation. Their profit was 5x lower than they thought. They actually had negative cashflow across the year, with no insight into whether this was ok, an issue, a risk or an opportunity.

They hadn't accounted for future liabilities like tax payments and were at serious risk of business failure.

We were able to move them over to Xero, create a finance forecast with planned liabilities (up coming big payments), help them understand what to do to improve cashflow and margins AND create a financial plan for 2023.

As always if you need any help or advice just reply to this email.

Don't worry I won't try and sell you anything :)

Unless you need it!


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