Mercury vs Relay: Banking for a Fractional Executive Practice

Better not to, once you're running all three. A placement fee is large and irregular enough that if it lands in the same account funding this month's payroll, it's easy to mistake a one-time windfall for sustainable monthly revenue when you're planning next quarter's hiring or partner draws. Relay's free sub-accounts make separating the three trivial: route retainer income into an operating account, hold project fees in a second account until the engagement closes out, and let placement fees land in a third that only releases to distributions on a set schedule rather than the day the fee clears.

A workable three-account split for this income mix:

• Operating account: receives retainer income, which is steady enough to fund regular monthly payroll.
• Project account: holds project fees until the engagement closes out, so unfinished work is not treated as spendable cash.
• Placement account: receives large placement fees and releases them to distributions only on a set schedule, not the day the fee clears.

If your firm holds placement fees for a period before distributing them, that cash shouldn't sit idle. The effective federal funds rate is at 3.63%¹ right now, and Mercury's automated Treasury sweep captures yield near that level on cash above your operating buffer without anyone needing to remember to move it manually. For a firm that closes a handful of large placements a year, the yield on that holding period, even just a month or two before scheduled distribution, adds up to a real number over several placements.

A boutique bridging a quiet stretch between engagements with a line of credit is borrowing at a cost tied to the bank prime rate, currently 6.75%². Before drawing on credit to smooth a slow quarter, check whether the pattern is seasonal, executive search and fractional placements often slow around certain times of year, in which case a cash reserve sized to that seasonality is usually a cheaper fix than routinely financing the gap.

Most fractional executive practices are small enough that an outside bookkeeper working in QuickBooks Online or Xero covers the need, which points toward Relay's accounting integrations and its options for giving that bookkeeper access. A larger, multi-partner firm tracking utilization and placement pipeline in its own internal system is the exception where Mercury's documented API earns its keep, letting that system pull account balances directly rather than relying on someone exporting statements each month.

Many search engagements carry some form of replacement guarantee, a window during which the firm will re-run a search at no additional fee, or in some cases refund part of the placement fee, if the placed executive leaves early, but terms vary, so read the contract. That's exactly why holding a portion of a placement fee before full distribution matters: it gives the firm a cushion to honor that guarantee without disrupting partner draws or payroll if it's invoked. Size that holdback against your own historical rate of triggered guarantees, not a guess, and keep it in the same dedicated sub-account discussed above rather than assuming general operating cash will cover it if the need arises. A firm that has never tracked its own guarantee trigger rate should start now, since a year or two of real data beats a rule of thumb borrowed from another firm's very different client mix.

A two-partner practice can usually run this entire structure, retainer account, project account, placement holdback account, tax reserve, with four sub-accounts and a shared spreadsheet for visibility, checked together at a monthly partner meeting. A ten-partner firm needs the same structure but with real ownership: someone specific responsible for reconciling each account, a documented distribution schedule everyone can see, and probably enough transaction volume to justify Mercury's API if the firm has any internal reporting ambitions at all. The mechanics don't change with size; the amount of process and documentation wrapped around them does.

Growth between those two points is where firms most often let the structure slip. A third and fourth partner join, engagement volume climbs, and the founding two are still reconciling everything from memory the way they did at the start, because nobody formally handed that job to anyone else. Treat the move from two partners to four as the trigger to name an actual account owner, even if that person is a part-time bookkeeper rather than a new hire, rather than waiting until a reconciliation error forces the conversation.