How should you pay yourself as a business owner?
When running your own business it can be very easy to use the business credit card for your day-to-day personal expenses or to draw out funds from the business bank account as soon as you get paid for an invoice.
However, there are a number of issues you can run into when doing this, so instead you should look to pay yourself a fixed amount that aligns with your business budget.
When setting your salary you should always review your business profitability and debt levels as overcompensating yourself could put a strain on your cashflow. Ideally, you should aim for a salary that leaves enough cash in the business not only to cover your overheads but to invest in its growth as well.
As your business grows you can always increase your salary, so taking a modest amount to begin with to keep your business running smoothly will pay off in the long run.
Running personal expenses through the business accounts will not only make it difficult when budgeting and managing cashflow but it can also create complications at tax time.
Paying yourself a salary will help you to put aside the right amount of income tax which is beneficial for your end of year tax planning.
It can also make sure you aren’t forgetting to top up the super piggy bank each year through compulsory super guarantee.
If you would like to learn more about this or would like help applying this strategy to your business then get in touch with us today!