Mercury

## How can Mercury be used to automate revenue distribution into tax and payroll reserve accounts?

## Overview Mercury's platform provides robust functionality for businesses to automate the distribution of incoming revenue into designated reserve accounts for purposes such as tax obligations and payroll. This capability is primarily enabled through two key features: the ability to create multiple, distinct checking accounts and a powerful 'Auto-transfer rules' engine. This system allows companies to implement structured cash management methodologies, such as the 'Profit First' system, by systematically segregating funds as they are received. By automating this process, businesses can ensure that funds for critical liabilities are set aside before they are commingled with general operating capital, promoting financial discipline and providing a clearer view of available cash. ## Key Features A foundational element of this automation is Mercury's support for multiple sub-accounts. Users on the standard free plan can create up to 15 separate business checking accounts at no additional cost, while higher-tier plans offer the ability to create even more. Each of these sub-accounts functions as a full, independent checking account, complete with its own unique account and routing numbers. This allows a business to establish dedicated accounts labeled, for example, 'Tax Reserve,' 'Payroll Fund,' and 'Operating Expenses.' The unique account numbers for each can be retrieved from the dashboard or via Mercury's API, enabling them to be used for direct deposits or payments if needed. ## Technical Specifications Once these dedicated reserve accounts are created, the automation is managed through Mercury's 'Auto-transfer rules' engine. This tool, accessible from the 'Accounts' section of the dashboard, allows users with Admin permissions to create rules that automatically move funds between their Mercury accounts. The engine offers several templates to simplify setup. The 'Distribute funds across accounts' template is particularly useful for this purpose, as it allows users to split incoming deposits by either fixed amounts or, more commonly, by percentages. For example, a rule can be configured to automatically transfer 15% of every deposit into the 'Tax Reserve' account and 40% into the 'Payroll Fund' account. These transfers can be triggered either by incoming deposits or on a set schedule (e.g., daily, weekly, or on specific dates like the 10th and 25th of the month). ## How It Works Another useful template is 'Maintain a target account balance.' This rule can be used to ensure a specific account, such as a primary operating account, always maintains a certain balance. For instance, a rule could be set to keep the 'Payroll' account at exactly $20,000, automatically pulling funds from an operating account if it drops below that level or sweeping excess funds into a savings account if it rises above. For more complex or event-driven automation, Mercury also offers a comprehensive developer API. Using webhooks, developers can receive real-time notifications of incoming transactions and then use API endpoints, such as the one for creating internal transfers, to execute programmatic allocations based on custom business logic. ## Use Cases ## Limitations and Requirements There are several important caveats and limitations to consider when using this functionality. Mercury's platform provides the tools for automation but does not offer financial or tax advisory services. The business is solely responsible for determining the correct percentages or amounts to allocate for tax and payroll obligations, and it is recommended to consult with an accountant or tax professional. Furthermore, the rules must be configured and periodically reviewed by an administrator to ensure they remain aligned with the company's financial situation. It is also important to note that internal transfers between accounts can trigger 'distribute incoming funds' rules, which could lead to unintended fund movements if not configured carefully. Finally, the timing of automated transfers based on deposits is dependent on when the funds clear, which can vary for ACH transfers versus wire transfers. ## Comparison to Alternatives ## Summary