Treating your Business like an Income, not an Automated Teller Machine
Before you started your own business, chances are you were rewarded for regular work with a regular salary. Money came through like clockwork and you budgeted until your next paycheck came in.
Being a small business owner doesn’t mean that your regular paychecks should stop. It’s time to stop treating your business like your personal cash machine and start paying yourself a regular salary. We’re here to tell you why.
Money in your business’ bank account is likely spoken for
A common misperception we hear is that all the money sitting in your business’ bank account is yours. After all, it is your business, isn’t it? Wrong.
That money belongs to the business, not to you personally. It needs to be used to cover things like salaries, equipment, rent, future tax payments or paying vendors.
Having a sufficient cash flow is vital for the success of any business, which is far easier to manage when you have predictable expenses to plan around- including your salary.
Big business = big money
Ultimately, you’ll need money to grow your business. By investing more into your business, you’re investing more into its success. As the business grows, you’ll need more cash to fund staff, technology and resources.
Depending on your business goals, knowing the exact cash in, cash out system is essential to helping you save as much of your profits as you can in order to build your cash reserves. By paying yourself a regular salary, you’ll know exactly how much money you have to be able to jump into the next stages of your growth plans.
Besides, the bigger the business, the more likely you are to be able to increase your salary.
Taxman’s radar is less likely to find you
Government tax departments are used to people (and you) receiving a regular salary. With a regular salary, tax auditors will see you as just another salary earner and you’re more likely to fly under their radar (which is always a good thing).
Banks like regular income
Say you’re looking for a mortgage for your new home- or a car loan for your new vehicle. When it comes to assessing a person’s ability to fulfill the demands of a potential loan, banks like consistency.
They want to know that you’re able to comfortably service the loan each month. They’ll be much more receptive if you have pay-slips and bank statements that show your steady cash flow history.
Stop treating your business like an ATM and start treating it like a regular income. As a small business owner, you enjoy being your own boss, but now it’s time to start enjoying being your own employee.
Now, how much should you pay yourself? We can help.