Our tiny bank run

A few weeks ago I wrote about wanting to be less scarce about money, then last week the quilt shop almost ran out of money. Life is a such a rollercoaster

What is a bank run?

One of the most catastrophic things that can happen in economics is the bank run, it might be the most catastrophic. When people lose confidence in the banking system they will stop using it - fast.

This generally occurs when a high volume of job losses, corporate bankruptcies and falling consumer trust all happen at the same time. Payments from lenders stop, paychecks stop, people yank their money from banks, banks run out of money and can't pay their lenders, they stop issuing new debt, consumers stop spending money, business income falls, leading to more layoffs.

All of this intertwines, cascades, and builds upon itself until the system seizes and you get situations like 1929, 1987, 2001, 2008, and most large economic fiascos throughout history.

We didn't have a giant economics collapse, but we did have a seizure of our bank which trickled down into every aspect of our life...for about 2 weeks.

Our timeline

Thursday, July 30th

A few weeks ago Miss Kate and I went to Chase to put each others names on our accounts. We had been procrastinating on this since our marriage and decided to finally address it thinking it would be a harmless and mostly aesthetic activity.

Tuesday, August 4th

we started to notice things were wrong. Our Shopify account wouldn't allow us to pay for customer shipping. To solve the problem quickly Miss Kate put her personal card in the app and kept things moving. Miss Kate is excellent at solving immediate problems, immediately.

Wednesday, August 5th

This is when things started to tighten up.

Shopify emailed us and said our payment to them didn't go through. For the last 2.5 years we have not had a problem paying Shopify, so this was notable. When I went into the back end of the billing system I found a mess that had been building for days

We also got an email from Quickbooks that our payroll (which I enter on Sundays, but doesn't clear until Tuesday failed. More specifically, Quickbooks paid our employees, but couldn't take the money out of our account. We don't have any kind of credit agreement with Quickbooks, so they said "until you WIRE us the money, we are done doing business"

Then we got an email from one of our fabric manufactures that the payment for product we had ordered 8 months ago, and presold most of already, did not clear, so they are going to cancel it's shipment to us and sell to another vendor.

This was peak calamity, and we still had no idea why this was happening.

Thursday, August 6th

We go to a local bank branch first thing in the morning and find that the paperwork submitted for our account when we added our names to this account was made in error, and the bank flagged our account as suspicious - closing it down completely.

Easy fix right?

The bank rep fixed the paperwork and sent a wire to quickbooks to satisfy them. We went to sleep in stress, hoping tomorrow we would see resolution

Friday, August 7th

Things get worse

The wire didn't go through, which anyone who knows wires knows they clear instantly so this was alarming for me. Miss Kate went to the bank for 4 hours and was told the debit card should be fixed, but ACH payments were still under review, so Shopify still wouldn't connect our bank account. The worse news was that since the activity was flagged as suspicious it may have corrupted our Plaid bank connector software.

Plaid is an automated software that connects banking products. This is what Shopify and some of our vendors use. Plaid does not connect to bank accounts, it connects to logins - so our bank rep told us if Plaid flags this login as corrupt - we will have no choice than to change banks.

Saturday, August 8th

By this time we are fairly frantic.

It's hard for a small business to go a full week without any income or the ability to make any payments.

Two good things happened this day. Miss Kate was able to talk with a long standing friend who works with our biggest manufacturer and use some goodwill to keep our product reserved for us, and at the very end of the day the wire to Quickbooks cleared. This was a small sign of hope.

Monday, August 10th

I was hoping that Monday morning everything would just clear and this would be done, but that was not the case.

I usually pay our staff on Sundays but without access to our business account we decided to pay them through Miss Kate's personal Venmo. We explained the situation, which they were totally cool with, but for Miss Kate and I this was a complete tragedy. We felt like failures.

We did see some positive movement though. The debit card started working and it started to look like Shopify was going to attempt to reconnect to our bank account.

Tuesday, August 11th

By this point we are checking the Shopify and Chase accounts 20 times per day to see if anything had moved. We had a plan to go to Wells Fargo and open an account and just start over, when finally, things started to open up.

Quickbooks sent us an email stating they received our wire and we were in good standing. ACH movement on the accounts started to go though - but for payments out only. Good news for sure, but now everyone is getting paid but us, and our little shop just doesn't have the buffer to survive for so long without any income. The bank account had never been as low as it was here, Miss Kate funded the company with more than what we had at this point.

Wednesday, August 12th

Shopify says they are making a deposit to us on the 13th! Finally!

Thursday, August 13th

Nothing happens, we have corrected all our standing with vendors and everyone is paid, but our account shows less than $2,000.

If we aren't paid tomorrow, we have to inject emergency capital into the company

Friday, August 14th

Finally, a deposit, and everything is back to normal

You better get tough as fucking nails bitch

My wife has a pet peeve about doing everything right and getting punished for it. She was very unhappy, and very stressed during this endeavor, and she did nothing wrong. The bank told us explicitly it was human error from the bank side.

Point is, business and life are both unfathomably unfair, and you better get tough as nails to deal with them. There is no referee.

It's also important to know that the number 1 reason businesses fail is because they are undercapitalized. You just run out of money before you get enough momentum to stabilize. I have had this happen in projects I've worked in and I see it happen in people's personal lives as well. It's important to have ample resources around for an emergency, never get comfortable, and never slow down when things get difficult.

During this 2 week stretch of pain we didn't miss any payments, we didn't turn off the store, we didn't turn off marketing, we didn't cut anyones hours, and no one from the outside world would know this happened if I hadn't talked about it openly here and on social media.

Meanwhile at home I watched my wife go through stress and anger but never relent. She grew crocodile skin. She got tough as nails.