Running Coffer with a revolving credit account

Plenty of contractors run their whole business through a revolving credit account (ANZ Flexi and BNZ TotalMoney are common examples). It's a lending facility where income gets paid in, expenses come out, and the balance floats up and down against a credit limit. This article covers why that setup pairs well with Coffer, and how to set the overdraft limit so the dashboard reflects your real position.

How these accounts work

With a revolving credit facility, interest is charged daily on the amount you've drawn. Every dollar sitting in the account reduces that drawn amount, so money parked there means less interest each day. That's why people route everything through the facility. Cash that's just sitting there, including the tax you've collected but not yet paid, works against the loan the whole time it sits there.

Why one balance is a problem

The account shows one number. The GST from last month's invoices, the income tax accruing toward your next provisional instalment, and the money that's actually yours are all blended into a single balance, and all of it looks spendable. Move the tax money to a separate savings account and it's visible again, but it stops offsetting the loan. Keep it in the facility and it keeps saving you interest, but nothing tells you where the line is between your money and the tax you owe.

This is what Coffer solves. Your money stays in one account, working as hard as it can, while the dashboard tracks which part of the balance is spoken for by IRD.

Setting it up in Coffer

Enter the facility's balance on the Bank page the same way you would any account. If you're currently drawn down, the balance is negative, and Coffer handles that fine. From there the usual math applies: latest balance, minus ringfenced GST, minus ringfenced income tax, minus pots, equals yours to spend.

The overdraft limit setting

Settings has an overdraft limit field, and it changes what “Yours to spend” counts. There are two sensible ways to set it:

• Leave it at zero. The dashboard counts only the cash that's actually in the account, and undrawn credit isn't shown. This is the conservative option, where credit isn't treated as money you have.
• Enter your credit limit. Your spending room becomes the balance plus the undrawn limit, and the ringfences are deducted from that. This matches how a revolving credit facility is used day to day, where the facility is your working capital and the question you care about is how much of it isn't committed yet.

A worked example with the limit set: a $20,000 facility drawn to −$6,000 gives $14,000 of room. With $5,500 ringfenced for IRD, “Yours to spend” shows $8,500. That's the amount you can draw for yourself before you start spending money that belongs to the tax bill.

When the IRD bill comes due

You can pay it straight from the facility. The ringfenced number has been tracking exactly this: it's the part of your drawn capacity that was never yours to keep. Once you log the payment as a tax event, the ringfence drops by the same amount, and “Yours to spend” barely moves. The bill was already accounted for, so paying it isn't a surprise.