During July’s Facebook Live, I discussed online business bank accounts and their savings spaces – what they are and how to manage them.
Managing “Pots/Spaces” in Online-Only Business Bank Accounts
Many business owners are now using online-only business bank accounts like Monzo and Starling. A key feature of these accounts is the ability to create “pots” or “spaces”—virtual envelopes within your main account to help you set money aside for specific purposes. These pots/spaces aren’t separate bank accounts; they’re part of your main account and allow easy transfers in and out at any time.
Common Confusion Around Pots/Spaces and Accounting
There’s often confusion among business owners and even some accounting software providers about how to handle transactions involving pots/spaces.
Most online accounting software supports Bank Feeds, where transactions are automatically imported from your bank account. If you have multiple bank accounts (e.g. current, savings), each one typically needs a separate connection.
However, pots/spaces in Monzo and Starling don’t have separate account numbers. They sit under a single main account. When setting up the bank feed, you may be given the option to include or exclude transactions involving pots/spaces.
Bank Statements and Pots/Spaces
Your bank may or may not provide individual statements for each pot/space. Even without formal statements, you can still view pot/space activity within your online banking dashboard. Regardless, you must record all transactions related to pots/spaces in your accounts. This ensures accurate tracking of funds—even though the money hasn’t left the business, it’s simply been allocated for a purpose. It gives you a clear picture of what money you have in the business, and where it is.
A Simple Analogy
Think of a pot like a piggy bank.
You receive £20 and put £5 in your piggy bank and £15 in your wallet. You still have £20 total—it’s just separated for a reason. In traditional banking, you’d need a second account (like a savings account) to do this. Pots/spaces let you do the same, but within one account.
How to Record Pots/Spaces in Accounting Software
The easiest approach is to use sub-accounts:
- Create a parent account, such as “Bank Reconciliation.”
- Under it, set up sub-accounts like:
- Bank Account 1234 (your main bank account)
- Bank Account Pots/Spaces (to represent all pots)
Some prefer to create a sub-account for each pot/space, but if you frequently rename or close pots, using a single “pots/space” sub-account is simpler.
Recording Pot/Spaces Transactions
- If pot/space transactions appear in your bank feed, categorise them as transfers to or from the “Bank Account Pots/Spaces” sub-account.
- If they don’t appear, enter them manually based on your bank statement or transaction history.
Recording these movements ensures you can later show where money came from when it’s moved back into the main account—it’s not income, just an internal transfer.
Reconciling Your Bank Account
At month-end, reconcile the parent account (“Bank Reconciliation”). This will combine the main account and pot/space sub-accounts, giving you a full picture of your bank balance.
Note: This method works well in QuickBooks Online. If you use different software, check with your provider, bookkeeper, or accountant to make sure you’re capturing pot activity correctly.
If you have any questions about how to deal with the unique system for saving funds used by some online bank accounts, please feel free to email me.