From Reactive to Proactive: Transforming Business Finances with Money Squirrel

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Welcome to Profit first beyond the Book, a podcast that takes you beyond the book with Profit first, brought to you by Tim Duncan and the rest of the Profit First Professionals UK and Ireland team.

There we go. Hello, Andrea, welcome along to Profit first beyond the Book.

Thank you so much for having me. It's a pleasure to be here.

Excellent, excellent. So I'm joined with Angela Daly today of Money Squirrel, which is a fabulous software aimed at helping people put money aside for tax and VAT etc for, for just a few examples, which of course sits really nicely with the way that Profit first operates. So, Andrea, I'm going to ask you a few questions. So apologies, I'm not trying to grill you, but you know, to start off with, do you want to give a brief sort of intro about what Money Squirrel is and then perhaps we can go back in time to how, what led you to there afterwards, but just so that everybody understands what we're talking about before we go too far.

Absolutely. Money Squirrel, the straight line is that we empower businesses to do so much more with their hard earned cash. But what that actually means in practice is that you can link up your business bank accounts, set a couple of automations or preferences, I should say, and then the automations will kick in and literally move money aside from the incoming current account into the various accounts, pots and so on that you've set up. That's literally it in a nutshell. We have big plans for the future, but that's what it does right now. Which was for me a really, really key starting point.

Yeah, absolutely.

Sorry, I was just gonna go into like how I ended up starting it, if that kind of answers the second part of the question. So the reason for that being the starting point was for five years I was running a software consultancy and super simple cash flow management. I'm fully aware of that. But every time an invoice would get paid, do my little happy dance. Best thing in the world, you know, happiest notification I ever get, you know, bills to pay. And because I'm really organized, I'm a project manager by training, but I'm really organized and I would every single time move the VAT element and another at the time, 20% of the rest into a separate interest paying savings account, which honestly was a pain in the bum to remember to do it. And none of it is automated, none of it is linked. And the more I did it, for me it felt like it was the same proportion every time. Again, I know that's a luxury, but, you know, a lot of businesses can't always manage it like that. But there's plenty of consultancies and anywhere on the SME spectrum that can and should, but don't. And the problem solver and the tech head in me and I thought, well if it's the same proportion, it could and should be automated. If I was outside of the uk, perhaps this already exists. And we looked around, I spoke to a lot of developers in lots of different countries and we couldn't find anything that actually did what I had in my, in my head. So fast forward we went and built it for the uk.

Fantastic. I love that you had an idea and you built it.

I did try and break it multiple times just to make sure it was a proper idea but I haven't managed it yet so.

Excellent, excellent. Well, I'm sure you'll keep trying but let's hope you don't. So at the moment, so obviously, you know, with Profit first and our Profit first professionals, we come across so many businesses, you know, as clients to us that do not have the VAT when it comes around to the quarter end, do not have their tax when it comes to paying their tax bills. So are those the two main accounts you're focusing on right now to start this up with? Is it a sort of conscious thing to start with the AT and tax and then add other accounts later?

It is. While it might not work for everyone, you have to start somewhere which I'm sure you more than anyone knows the ins and outs of. You can't. It's very difficult to change business owners mindsets and approach to managing finances. Certainly from what I've seen and heard to kind of go from zero to everything @ the same time. Especially when you then add in a new piece of technology and something that you know, realistically an unknown brand is asking business owners to trust us with their very sensitive financial information, which we have covered. But you don't know that until you, you know, it's building up the trust and also changing behaviors and the mindset around it at the same time. And when I said that I was trying to break my idea, the first, one of the first things I did was I wanted to see is my problem just my problem or is it big enough that this should be solved on, on scale, at scale. So I went to the HMRC and under the Freedom of Information Act I asked for some information, for some data. From them I can get the words out to quite literally prove the size of the problem. And they are just because of the way that the data sits in various silos across the beast that is hmrc. They gave us three years worth of late VAT submissions and the value associated with them, not of the submissions themselves, not the fees. And the same for corporation tax. And this. The problem is big. Never mind when you get into penalties and stuff like that, the actual volume of late submissions, never mind payments and all that sort of stuff that goes along after it is honestly horrific. I think in 2023, if I can remember right, it was something like 1.2 million late VAT returns were submitted. And we now know that the HMRC is cracking down even more when it comes to fees and all that sort of stuff. But just focusing on those two, they're the ones that are inevitable. You will owe that money as soon as you start trading and you start invoicing. And VAT certainly is the bit that most business owners will just spend the cash that they already owe as soon as it reaches their account, because it's not separated out, which until you separate it out, why would it be? Right, it's fine on a balance sheet or in your accounts, but most of them are done in arrears or you have to be proactive to look into it in the first place, remember how much you owe and all this sort of stuff, talking about it is complex, it's a nightmare. So it's easier to kind of just go, I'll deal with it when my accountant starts talking to me about it. By which point you probably don't have the cash to pay anything, but you already owe it. It's a never ending.

Cycle. Yeah, I understand totally. I've seen it myself from when I had my accountancy business in the past with some clients. And I find actually although we're called profit first and we talk about profit first all the time, we often start with the at with clients. It's actually in alignment with what you're saying because quite often if you can solve the VAT issue and get businesses being able to pay their VAT on time, then it allows them to start to put money aside for the other things that they need to. And of course, yeah, the annual corporation tax, the self assessment tax of course then has to be dealt with as well. But at least when you solve those, you can start solving how much they pay themselves from their business and what profits they can make. Is there money for that profit? So obviously we focus in these areas, but I'm totally on board with the fact that you have to start with the 80 more often than.

Not. And it's the simplest one at the End of the day, like you're not trying to. Yes, of course you're not going to pay. Always say if you're on the 20%, there will always be some buffer in that. But if at least you are able to put the 20% or close enough to it, if your accountant knows a better, a better average or a better figure for it, then not only does that give you the peace of mind, but it also, if it's in the right sort of account, it starts building up. Not just a passive income, but if you overpay it or over account for it, all of a sudden you've got a little bit of a rainy day fund. And if you do need it, let's be honest, most businesses at some point or another need it. Even just that will.

Help. Yes, totally agree. And it's interesting how you say that because we, what we do with our clients is we talk about how their income comes into the business. So is that a regular flow of money coming in every week? Is it people set up? So for accountants or bookkeepers, it might be people set up on the monthly direct debit to pay the same day. All their clients pay the same day. So they only need to do allocations once a month. But let's talk business owners in general and assume these are our proper professionals clients we're talking about. So I think it fits, it fits both sides. But let's talk that there's more people in that area. So what we encourage people to do is choose the same day and the same time each week to log on to their bank, make their allocations into their VAT account, into their profit. Owners pay tax, etc. And what's left is left to run their business on. As you know, that's the profit first kind of strategy. How would that work within money scroll, is it possible to do it weekly or does it need to be monthly and is it percentage based as well? How does it work? Just so we can understand, I.

Need to caveat a few things here before I talk about what it is right now versus what we're already working on, which is a revamped version that is going to allow quite a lot more flexibility. That's coming out probably in a few weeks actually. Now I won't commit to a date because it's tech and it's just not how it works. But it's. There's a difference. There's a big difference between right now, which can be a little rigid but still so much more useful than not doing it at all or doing it Manually versus then the more kind of nuances that is inevitable and very well needed. But I'll actually start somewhere a little earlier. So long before I had anything more than we were building the prototype we had, we knew what it, what it should look like and what it should do and all this sort of stuff. But before I started selling anything, I just wanted to talk to people and get more insights into their problems and also just continue to add value. It's, it's hardwired into me anyway. And I was running a very, very short kind of webinar that I turned into, you know, just a, an ungated. Almost like one of these LinkedIn, you know, slide show things that just gave three things. Three common sense, practical, very similar to what you're talking about. Set a reminder or set a slot in your calendar. Once a week is fine, but keep it in there and have a prompt, a reminder or whatever, go and do it. And here's a calculator so that you can backtrack the VAT amount from the total figure without having to go. Because I would have to go into my zero, my free agent, whatever to actually work all of that out instead. And literally three things. Set the reminder, go and do it. And here's a link. That's it free, right? There's, there's no sell in there. Just do these three things. And it's not, it's just common sense. And already you're in a better position. The product right now will do all of that for you. And at the moment it looks at your incoming transactions once a day, all your incoming transactions for the day. So it's not weekly or monthly, it can be daily, 4.

O'.

Clock. It will run all of those and according to your preferences, which I'll also talk about, it will then give you a prompt at 4 to say, hey, do you want to. This is today's amount. It doesn't even show it in the, in the preview. But do you want to go and do it? And if I do it on my phone, it then takes me to authenticate the amount and then fingerprint my, my. It's taken me longer to explain it than to actually show, which is how fast it is. But you don't have to. You still retain the control. You still have to authorize it from basic security. We'll never try and get around even if we were able to. But you don't have to. So you can do it. You can batch it and you can do it once a week, or you can do it on a Tuesday. And a Friday if you want to, at the end of the month I think is a little harder to manage because of just basic cash flow. Right. The amount that you might have in your account might not total. It gets a little more complicated. But absolutely you have that control. The way that it's set up at the moment is you can set two preferences, they're both percentages. One is the VAT rate 5%, 20% or just ignore it entirely. Of course we'll change that so it's a little more, you know, you can have a bit more control over the actual amounts but just for now, click it and off you go. And then the second one if you want to, then you know, maybe 5% or another 20% of anything that's X the 80 or the total. If you're not that registered, that then is what drives those calculations. So it's simple but really powerful if you're not doing it at.

All. Absolutely, yeah. I, I love the thought of daily allocations being done for you. Absolutely love that. And that's my profit first, you know, love of profit first coming out there because having that clarity and the point of profit first is to, is for business owners to be able to pick up their phone, open up their banking app and look at all the parts and say, right, I've got that money for this, that money for that, that many flat peace of mind and what have I got left to spend on? Can I make that purchase? Yes or no? Actually no, because there's not that much money in OPEX account right now but there may be next month or I need to think about how I can make that happen and do I really need it? Which is the question we really want them to ask is do you really need it? So it's really interesting how this takes away the having to log on to the bank all the time. But I like the fact that you get the email to say, yeah, I guess you just say yes or no. Yes, please do it. Etc. I guess that's how simple it.

Works. Yeah, exactly. That you have the option at least and it reminds you you don't have to remember at the end of the day to do your, you know, your housekeeping. I've seen people who are really organized and they have a, like an end of day routine in their calendar and most people get so busy that even if they have the time blocked out, it still doesn't happen. This will quite, quite literally keep doing it in the background to your preferences and all you have to do is see it, ignore it or Click it, do it. And it takes, you know, less time than it did for me to actually say that sentence out loud. And it's always within your control. We don't ever touch the money, we don't ever hold the money. It goes from your bank account to your bank account. So if you need to move it or access it immediately, as long as it is an instant access account you're sending the money to, you can, you.

Know. And you touched on earlier, you made a comment about changing the behavior, which again fits in perfectly with profit first. So can you elaborate on that from your.

Perspective? Yeah. So the strap line is what I mentioned earlier is about empowering business owners to do so much more with their hard earned cash. Which is honestly my reason for getting up and doing this every single morning. Because we've all worked in an incredibly challenging climate. Not just now, but anytime over the last however long we've been in work. We know how hard it is as business owners to constantly keep up with the external shuffles that we have to account for. And cash flow is the backbone of every business and businesses are the backbone of every economy. It just seems really fundamental to me. So why not set ourselves up to succeed as much as humanly possible? And this seems like just taking bits of what we already have access to. Almost anyone can or should be able to open a business savings account. I'm not talking about the complex company structures, but you know, in theory we all have access to it and as long as we pass those, those hoops, we can. So let's leverage it. The what I'd love to see. And we're an early stage startup, so I don't, I'd love to. I have no idea if we're going to make it that far. But what I'd love more than just the strap line is actually changing business owners, not just in the UK mindsets from reactive to proactive without them ever having realized or have to do any work to do that. Because this is using something that again, it comes to automation but within your control to just doing us so much more of that. And I think it's okay to talk about it here because I don't think it's going to like choose anyone. But for me the power of what we're building is actually fundamentally a data platform. But what it's going to the more, more important bit is we already have access to all of that data. What we have a gap is what do you do with it, what's the action behind it? And it's not enough for me to know at the end of the year what I need to do retrospectively, because I haven't accounted for that yet, I need to know a little far, you know, a little further in advance or at least try and get on the front foot of it. So I'm not getting into fees and depth and that vicious circle we were talking about earlier, that's the main thing for me. So, for example, one of the things that we're building out now is we started with Sage, but we're building integrations with all the accounting packages just to again, take data that we have access to in one place so that it gives the business owner the action to carry out behind it. And what I mean by that is, you know what's coming into your bank account, you know what your VAT liability is off of that amount, because we know how to calculate it. What do you owe? Well, it's in your accounting package. As long as it's kept up to date, it's there. But how do you know how much you owe right now? So what we've already done is we want to have the VAT liability amount and date, corp tax liability amount and date just displayed against what you've already kind of squirreled away via the platform in one easy to see place so that you can and you don't again have to log on to the banking apps. Look, plural, because there's so many of them and then the accounting packages to get all of that information to make sense of it all. And we're not trying to rebuild accounting packages or banking apps. It's just literally bridging the gap between the data and the knowledge to again. Right, change that mindset from reactive to proactive because you are more on the front foot than. And we're trying to make it as easy and gentle and just brainless almost as possible. You.

Know when, when you said the first time you want to move business owners away from being reactive to proactive, I did like a secret, secret one of these in the back because that's exactly what we try and do as well. So it just fits so nicely and, and it would be. And I think this gives a great opportunity actually to business owners to change that mindset. I think your, your software is going to be. Could be massive in helping that make that change. Which is. Which is your.

Mission. I know so because I am my very, very own first happy customer, I was literally solving this problem for myself. But the reason I tried to break it is I wanted to see, is there anyone else who could benefit from this. And so many people.

Can. Absolutely, absolutely. And. And I don't believe it's. I believe it could be worldwide. It doesn't have to just be in the uk, does.

It? I'm actually recording this from Doha in Qatar and even though they have very few taxes here, there is actually. I had no plans for international expansion anytime soon, but life took me out here for a while and happened to find out that there is a big push to bring in international businesses to come and start trading here and in other areas in the Middle East. But for those, they're bringing in a 10% tax. So actually for all those businesses immediately, our software is now applicable in a country that actually is fairly tax friendly straight away and in an area where they're really keen on tech and fintech because they can see the value it's going to bring. That gets me excited to. At least if I'm here, let's explore it, but without it being a.

Distraction. Understand that totally. And why not? While you're there you may as well explore these things and it's just.

Conversation. Yeah.

Yeah. And so coming back to the UK just, just for a while does this. So this is, this is software and it connects to the bank. Does it connect to all the banks at the moment? Is there, is there, you know, are there issues with any banks or do all the banks come on board with.

This? Yes. The short and annoying answer is it's not all the banks because it's fundamentally dependent on things we have no control.

Over.

Yeah. There is something called open banking. We are building off of an open banking trusted FCA approved regulated vendor that provides those connections pre built for us. We just tap into them and configure them however we choose the current bank accounts, it's a pretty good list. Or I think all the neobanks are on there. A lot of the others that you'd expect. Surprisingly, and I don't know why I was surprised by this, but someone in Northern Ireland mentioned the Ulster Bank. Turns out that's on there as well. I didn't expect it to be just. It's such a. To me, small name but perfect. There are limitations and in time when we can rebuild those connections ourselves, it could be that, that we can expand on it. The bigger limitation is on linking the savings accounts because most of them have not been mandated to be open banking yet. But what that means is that if it's not. If you're. If the savings account you want to link isn't on that list, you manually enter the sort code and account number, nothing else. And that's it. You can still actually send to that. What we can't do is read any data back so we can't display annoyingly and unfortunately the savings rate, we don't have access to it. It's a one way kind of send, but it just means that it's still very viable way of working around those.

Limitations. Excellent. Yeah. Okay. Yeah, I was expecting it to be a long answer to a short question because obviously the banking regulations, I mean, who wants to understand all that? I guess you have to give them what you're.

Doing. Yes, exactly that. So the short answer is it's a restricted list, but it's not as restricted as even I expected, which is.

Nice. Yeah, brilliant, brilliant. Okay, so arguably the majority of business owners in the country would probably be able to use Money scroll without too much.

Trouble. Yeah, exactly.

That.

Excellent.

Okay. And, and so I'm gonna, I'm gonna put the, the website up on the, on the screen for people watching on the video and you know, how, what, what are the first steps that someone can take to start their journey with Bunny.

Squirrel? Well, it's changing so drama dramatically. I actually saw the updated designs for the journey earlier. So at the moment you need to have a savings account to be able to use the platform, which we're changing because it's more of a journey than it is. Have everything ready and off you go. Right now, link up your current account. Every business owner will have a business current account. Open a savings account. The important thing, and you probably talk about this is more about the interest rate that it comes with rather than it just being a pot or a space. Of course, leverage those if, if you don't have a savings account for the time being. But it's. The interest rates are so nice and it's still, it adds up so quickly and honestly, like I've not been in a position recently or in the last few years where I can afford to leave even the 20 pound interest every month, you know, to. It pays for what it pays for Notion or Microsoft or a couple of those actually, even on a fairly small deposit in there. Link them up, set your preferences, off you go. We're changing it though, so that in a few weeks actually you can start seeing real value ads before you've connected anything up and then you can choose to connect and start building out your own data in there so it's more accurate and more tailored towards you. But this is more about information and then prompting you to take some of those actions and gently kind of easing you into it rather than it being quite a strict and quite regimented onboarding process at the moment. It doesn't take long. I think someone timed it and if you have everything ready you can do it in about two minutes. Yeah.

Excellent. And so.

Easy. Easy to join, easy to take.

To start putting your VAT and money aside and earning some interest on it, which is always beneficial, especially this day and.

Age. Exactly. The longest thing is for people to open a savings account if they haven't already got one. The horror stories I've heard, I heard someone waiting for more than three weeks and then they got a we need some more information. When they opened it with someone else and it was two hours.

It's. Yeah, yeah, it's crazy. I'm sure we could have a conversation about banks and the service we get provided, but probably not the place to, to have that discussion. So I think you mentioned banks with spaces and pots as well. So does, does Money Squirrel work with the likes of Starling and Monzo and those types of app based.

Banks? At the moment there's no real benefit to linking it up because you're already Starling and Monzo, they, they all offer some level of automation, especially for the vat. If you're already paying for it or have access to it, you don't really want to be paying for our product to do the same thing or something similar. Now it doesn't do exactly the same thing but the benefit is to be able to leverage more of the neo banks and then the higher interest paying savings accounts which is not what the neobanks offer. But if you've got access to the pots, the savings spaces and all of those, that's where I always encourage people to start with because this is just as a business owner rather than it being like buy my product. It doesn't make sense. If you've got access to those, leverage those first. But just remember that the interest does add up and it's, it's an additional revenue stream that you are potentially leaving, leaving quite literally on the table. So that's the real value.

Add. Yeah, no, I understand that and I imagine the interest is higher than you would probably get from those pots.

Anyway. If we're honest, they don't pay anything. None of the neobanks pay any interest on those. So they're, you know, they're profiting off of our money but we don't get anything for the, for the benefit of it. That's the frustrating frustration for me. I think of those. But even without locking your money away for 90 plus days. You can still get up to nearly 4% at the moment elsewhere. So that's, you know, we've got calculations all over the place to show what a turnover ends up like working out to, in terms of the interest, especially over three.

Years. Brilliant. Yeah, and I bet that's, that's good to look at as well, that, that would be good to see that. Really interesting. So this is Profit first beyond the book and the, the idea of the podcast is to talk about things in relation to profit first that you just don't get from the book. So, so here, here's the, here's the tip that's coming in this episode because in the book Mike talks about making your profit first allocations on the 10th and 25th of each month. Now over in the UK, we don't tend to subscribe to that, we tend to say, no, that doesn't really work here. So we work on either a weekly or monthly basis. As I mentioned earlier, my ethos has always been same day, same time, pick a day, pick a time, create the habit, make sure if it's 9 o' clock on a Friday, you go in, you do your allocations, it's done. But here's the thing now, so here's the tip that goes beyond the book is if you've got a money scoring account, you get an email at 4 o' clock on a daily basis, I think it was 4 o' clock on a daily basis, asking you to confirm, you confirm and your transfers are all done for you to the settings you've already created. So there's, there's a fantastic tip and a fantastic step forward, using technology to still have the habit because you get the email so you get the nudge, so you know it's happening. So, so whereas automation is great, I love the fact that there's still an element of control and an element of accountability because you've got the email that just says, yes, I'm making my allocations now, my VAT money is going over there, maybe my taxman is going over there and in the future maybe it be my profit and my owners pay, etc be going over there as well in different parts. So I think it's fantastic. Andrea, I really think this is going to be really beneficial to all business owners, but especially for profit first businesses. People that are running profit first in their business, people that are working with profit first professionals, and our profit first professionals themselves, who I know when they listen to this, most of them are going to be like me and get quite excited about the whole idea behind it all and, and, and try and work out how they can help their themselves but also help their clients because I think that's a really good place for people to.

Start. Yeah, yeah, it seems really well aligned. You know, whether you follow the methodology or not, it just seems like something such a natural overlap because of the behaviors, you're still doing the same thing. And not to be like super reductionist, but it is challenge our budgeting at its most fundamental. However we end up doing it and whatever percentages everyone uses, if you're not doing it, you're still losing out on something that is to your own detriment versus how easy can you make it? How can you change that behavior to actually keep doing it? And that's, yeah, hardwired into the problem that I'm trying to.

Solve. Absolutely, absolutely. And the best comment of the day for me so far was about helping business owners stop being reactive and being proactive. So I love that, absolutely love that. Now if you want to find out more, you can go on to LinkedIn and you can find many squirrel on LinkedIn and as I mentioned earlier, you can also go onto the website for MoneySquirrel UK. Um, Andrea, is there anything you want to add? Is there anything I haven't asked you that you'd like to share with the viewers at.

All? Do you know what? No. I think we've covered absolutely everything. Like, like I always do when I start chatting about something I'm passionate about. I can't think of anything that I would love to. To close with. No, no parting words of wisdom from.

Me. That's okay. Fantastic. I must have asked all the right questions, so that's, that's a good sign. Okay, brilliant. Andrea, thank you very much for joining me. I'm sure this won't be the last time our viewers here or see you. So be welcome to catch up again soon and find out how things are progressing with Money Squirrel and how it syncs with Profit first even more. Thank you very.

Much. Thank you so much for having.

Me. Thank you for joining us on our podcast today. Profit First Beyond. The book was brought to you by the Profit First Professionals UK and Ireland team. If you'd like to find out more about Profit first or becoming a Profit first professional, head to our website.