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In his book, How to Grow Your Small Business, Donald Miller describes the method he developed to keep track of his business finances by using 5 different bank accounts. He calls it Cash Flow Made Simple and you can learn about it at BusinessMadeSimple.com.
The 5 checking accounts he recommends are:
- Operating Expenses
- Personal Checking
- Business Savings
- Tax Savings
- Investment Holdings
The key idea is that the business runs out of a single checking account (Operating Expenses), while any additional funds automatically flow into accounts designated for taxes, profit, and investments. This helps ensure profitability and growth over the long-term.
I love the simplicity of this method. It ensures you pay yourself first while also helping you to put money aside for necessities and growing your business. However, opening and managing 5 separate business accounts feels overkill—especially for a solo-entrepreneur/freelancer. That’s a lot of extra admin time spent setting them up, keeping account numbers straight, initiating and monitoring transfers between accounts, etc. Not to mention that many banks will charge a monthly service fee for each account you have open, unless you keep it above a couple thousand dollars.
I wanted to find a way to implement the 5 Checking Account approach without having to actually open 5 separate checking accounts. Fortunately, I've been using HelloBonsai.com for my LLC. It offers everything a freelancer needs to manage their small business: proposals, invoices, bookkeeping, time tracking, project and task management. And it includes a Bonsai Business Account (formerly Bonsai Cash), a free, integrated business checking account.
What's great about this checking account is that Bonsai let's you create virtual envelopes that act like subaccounts. While the money is all there, the balances of each envelope reflect how much is set aside for each purpose–taxes, profit, investment, etc. You can also create automations between these envelopes, which makes everything much easier.
Setting up cash flow envelopes in Bonsai's Business Account
Here's how I have my Bonsai Cash envelopes set up like Donald Miller's Cash Flow method.
| Cash Flow Account | Bonsai Envelope Name |
|---|---|
| 1. Operating Expenses | Bonsai Cash |
| 2. Personal Checking | [Chase Checking] |
| 3. Business Profit | Business Profit |
| 4. Tax Savings | Taxes |
| 5. Investment Holdings | Investment Holdings |
Operating Expense Account
All the money you make and spend on daily business operations goes here.
This is my Bonsai Cash account. It's the main balance I see when I log in. This is where payments for my invoices are deposited. It’s also the account debited when using my business debit card to pay for subscriptions or other purchases.
Don Miller recommends keeping enough money in this account to cover the highest expense burden each month, e.g. your total anticipated outflow, including your own salary.
Personal Account
This jar is just for you. It's where you put the money you pay yourself, so you don't mix up personal spending with business expenses.
I didn't create an envelope for my personal account. My wife and I use a separate bank where we have our joint checking and savings (we happen to use Chase, but you can use whichever bank you’d like).
At the end of the month, I transfer money from the business into our personal checking when it’s time to pay myself.
Business Profit Account
This is your savings jar. The extra money your business makes, after all the bills are paid, goes here. It's like your safety net if anything goes sideways.
I created an envelope I call “Business Savings”. When I review my bookkeeping at the end of the month, I look at the main Cash envelope and if it’s above that predetermined amount, I transfer money to my Business Savings.
Don Miller recommends keeping 6 months’ expenses in your Business Profit account.
Tax Account
Set aside money for taxes in this jar. It keeps you ready for tax time so there are no surprises.
I have an automation set up that immediately transfers 30% of any income into a Taxes envelope. Don Miller recommends small businesses set aside 50%, but based on our previous years' tax returns, I determined 30% would be sufficient.
Bonsai shows my estimated taxes based on my current tax profile. It uses my Year-to-Date income and expenses to recommend Quarterly Estimated Tax (QET) payments and gives me a link to pay online right from the app. It will also track the tax payments I've made, whether through the app or separately.
Like you, I dread tax-season. But since I've been using Bonsai, I've never been surprised by a tax bill for my small business.
Investment Holding Account
Think of this jar as your future jar. Money here is for growing your wealth outside of your daily business operations
Once my Business Profit account has at least 6 months' savings, I start to transfer any extra money into my Investment Holdings envelope. This is where I stash money to make important purchases (like upgrading to a shiny new M4 Pro Mac mini 🤓).
Take off!
Once you have your accounts set up following the Cash Flow Made Simple method in Bonsai, your business can start generating revenue and profit, and take to the skies!
If you're ready to automate your cash flow, head over to HelloBonsai.com to get started.
Novo.co
If you don't need all the extra features of HelloBonsai and just want a bank account that lets you create separate envelopes, check out Novo, the small business bank. With Novo, you can use Reserves to automatically put money aside for taxes, payroll, profit, expenses, and more, just like envelopes in Bonsai Cash.
Use my referral link and get $40 when you open a business checking account with Novo.