Mercury vs Relay: Banking for a Seasonal Tax Practice

Add up your firm's total annual operating costs, payroll, rent, software, insurance, and divide by twelve to get a flat monthly number. That's the baseline your seasonal revenue needs to fund evenly across the year, even though the cash to cover it mostly arrives in a few concentrated months. Once you know that number, the rest of the setup is about making sure the account structure actually delivers a flat draw against lumpy income, rather than a partner improvising month to month based on whatever happens to be sitting in the account that week.

During your firm's busy season, route a fixed share of every payment into a dedicated smoothing reserve, sized to cover the off-season months at your flat monthly baseline, before any of that revenue touches discretionary spending or early partner distributions. Relay's free sub-accounts make this simple to set up and simple to see: watch the reserve build during the busy months and draw down evenly during the quiet ones, with the balance itself telling you whether this year's season funded the coming off-season adequately.

A smoothing reserve that's fully funded during busy season and only fully drawn down by the following season's start is sitting idle for a meaningful stretch of the year, and that idle time is worth earning yield on. 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 working buffer, a solid fit for a reserve that's predictably going to sit for months before it's needed. Relay's savings sub-accounts pay a published rate too, just without the same automated sweep into short duration Treasury instruments specifically.

Some seasons run lighter than expected, client losses, a slow filing season industry-wide, and the smoothing reserve doesn't fully cover the coming off-season. Decide in advance how the firm handles that: a credit line to bridge the gap, priced off the bank prime rate currently at 6.75%², or a planned reduction in off-season discretionary spending and partner draws instead. Having that decision made ahead of a shortfall, rather than improvised during one, keeps a rough season from becoming a rough year.

If your firm does meaningful planning and advisory work in the off-season, tracked through a practice management system, Mercury's API can pull banking data into that system alongside engagement tracking. If off-season work is smaller and handled more informally, Relay's native QuickBooks or Xero integration and free sub-accounts are usually enough, with the main decision being how many separate sub-accounts to run for different revenue types, seasonal filing work versus year-round advisory retainers, if you run both.

Many tax practices bring on seasonal staff or contractors specifically for filing season, which adds a temporary payroll spike right in the middle of the year's busiest cash collection period. Make sure the smoothing reserve calculation in step two accounts for that seasonal staffing cost as part of the season's own expenses, not as a separate surprise, since seasonal payroll is entirely predictable and belongs in the same planning as everything else the reserve is meant to cover.

Once a filing season wraps, compare what actually happened, revenue collected, smoothing reserve built, seasonal staffing cost, against what you planned for going in. A practice that does this review every year tends to catch drift early: a reserve that's been running short two seasons running, or off-season advisory revenue that's grown enough to change how much the reserve even needs to cover. A practice that skips this review is more likely to be surprised by a shortfall than one that's tracking its own pattern deliberately every year.

After each filing season closes, work through these checks:

1. Compare the revenue actually collected against the plan you set before the season began, and note where any gap came from.
2. Check whether the smoothing reserve reached the size your flat monthly baseline required, and record any shortfall.
3. Total the seasonal staffing cost and confirm the reserve calculation accounted for that temporary payroll spike.
4. Adjust the reserve target, the partner draw schedule and any credit line plan for the coming year based on what you found.