Do you find yourself always struggling to pay bills, taxes or staff?
At the end of each month do you find you don’t know where the money has gone and struggling to take any money out yourself?
You can’t work for free any longer!!
It’s time to start making some positive cash habits.
On basic terms this is just saving and allocating the income you receive to specific sections. (And not borrowing it!)
Where to start?
Firstly, you need to have somewhere to transfer the money to. So a couple of business bank accounts or most new ‘challenger’ bank accounts have pots or spaces that you can save money into. If you can have 2 or 3 extra bank accounts then this is ideal.
Name these extra accounts or spaces – one always needs to be for taxes, one for paying yourself, if you can have others then these are great for staff salaries, one off expenses you always forget about and business savings for future investment.
The main account will be for your every day costs and expenses.
What to do?
EACH time you receive income transfer a percentage to each of these accounts.
You can decide the percentage to transfer by looking at your historic figures, costs and what you want to achieve too. I always advise to transfer 20-30% of income directly to taxes (the higher for VAT registered businesses). If you transfer based on income then you will always have more then needed once the expenses are taken into account.
If you have 5k turnover months and you want to take out £1k per month you know you need to set aside 20% for personal and so on.
The percentage you need to transfer will be specific to you and your business.
But as an example;
Tax account 20-30% depending on your structure and if you are VAT registered
Leaving 20-30% in the main account for expenses
You may find that this doesn’t leave enough for your monthly business expenses and you can take what you want out of the business. Using cash habits and operating in this way is a great way not only to get your business in a better cash position but also a quick way to get an overview of what isn’t working – maybe you need to cut costs, find out where you are overspending or maybe you need to increase your prices.
To get used to these new habits it is great to start doing this daily or at least weekly.
It is really important you do not borrow from these accounts.
You might feel this won’t work for you but what have you got to lose?
If you answered yes to any of the questions at the start then you have nothing to lose.
You will watch the money adding up and the relief when you can pay you bills and yourself!
Just try these cash habits and let me know how you get on.
If you want any help setting it up or getting the system working for you then get in touch and book a discovery call.
If you would free business tips and advice then subscribe to our newsletter and join our free facebook group.
Get ahead, get it done.
Get in touch if you would like support with completing your tax return.
Ask me for my FREE 22/23 Tax Return Checklist
Thank you for reading this weeks blog – Cash Habits – What Are They?