In today’s world of banking propped up on debt, banks have become increasingly unreliable as we saw in the Silicon Valley Bank in America, the responsibility of making sure your business stays overboard lands on your shoulders as an operator. The question now is what can you do? Make the banks change their way of operating? In an ideal world, this would have been the way to go but in reality, the old adage of “prevention is better than cure” holds true.

The S.T.O.P. System is a banking system used by savvy businesses to streamline their financial efforts and simplify their banking operations. To follow this system you would require 4 different bank accounts, these bank accounts are:-

1.       Operations- This is the first account that you’ll need, this is where any revenue from your company will first hit, and this is the same account from where it will also be disbursed to your other accounts, incidentally this will also be your account with the highest transaction density due to the above reason. At this stage, you will have to keep the capital required to fund the day-to-day operations of the organization such as payroll, office expenses, inventory cost, etc., and the rest is transferred to the next account on the list.

2.       Taxes- There are few things in this world as inevitable as taxes and death, in keeping with this spirit, this account will be set up for taxes and compliances, here you will only keep the money that needs to be paid out to the government as your organization’s tax obligations. If this step is done right, come tax season the government will be owing you and not the other way around. Now, while being owed money is not the most ideal place to be, it is so in the case of the taxman.  

 

3.       Savings- This is the part of the process where we enter a bit of a circular phase, officially the money in this account is your profit, but this account exists to make our organization as ready as it could ever be for any rainy days or any opportunity that might present itself in the future, which is exactly why you should keep a minority portion (20%-30%) of your profits in this account. After years of following this advice, your company will find itself sitting on a big pile of cash. Now ideally this cash reserve should be invested conservatively to grow at a steady rate, this not only gives you capital to deploy in times of cash crunch, but also money to acquire assets at a discount when the opportunity presents itself, while at the same time bolstering up the asset section of your balance sheets, leaving you with the fabled Fortress Balance Sheet. What’s left after this will be transferred to our final account. 

 

4.       Profits- After the implementation of this process you’ll find that all the need of the business is well taken care of, and what is left is money that can now be used to pay dividends to your shareholders and if something is left it should be moved back to the savings account.

 

1.       All of these accounts should ideally be in different reputed banks.

2.       Tax obligation will be calculated by a registered tax professional.

3.       To calculate payroll you could use a product such as Cedur, Zoho payroll, etc.

4.       Money in the savings account should be invested responsibly in low-risk assets after talking to an investment professional.