For every £1 that comes into your business – do you know what percentage is yours???
Having all your money in one bank account is like having your family’s clothes in one drawer … it would be very untidy and cause havoc.
But so many business owners do this. I used to!
I used to worry about paying bills during the months in case there wasn’t enough in the account at the end of the month to pay my staff as I felt that they were my most important outlay.
I used to feel that over the quarter my account would grow and I’d feel I was getting somewhere and then suddenly the VAT bill would come my bank account would depleted.
If this sounds familiar then I have an easy solution for you – get more bank accounts!
There are numerous benefits of having multiple bank accounts (we’ll discuss those in detail another time) but first I’ll talk you through how we structure our accounts here at TIA.
So, without further ado let’s get to it..
First things first, we have a bank account that we call the Income Account. All our sales go into this account then every Friday we split it across four other bank accounts.
The first percentage goes into the Salary Account. As I said my team are my most important outlay and a large percentage of my costs so I have it in a separate account. This pays my teams salaries, my salary and the teams bonuses every year. Now I never worry if I can afford to pay the team as the money is always there at the month end.
The second percentage goes into the Tax Account. This covers the VAT, PAYE and Corporation tax so this does get higher over the 3 month period for VAT and 12 months for Corporation tax but I never worry about the VAT bill as the money is always there.
The third percentage goes into the Profit Account. By having this percentage it ensures I reap the rewards of my hard work. I am not paying everyone else first and seeing what is left .. as the business owner I’m paying myself first. I use this account to pay my dividend or reinvest into the business as I choose fit – the mental benefit of having this account is so inspiring.
The last percentage goes into the Expense Account. This is the account I have all my direct debits and one off bills coming out of. Having this account helps us to not over spend as you can see how much money is in the account.
If you still have all your money in one bank account then this is something you can implement to help your business run smoother and give yourself a better nights sleep.
You can work out the salary and tax percentages from historical data and then you get to pick the profit percentage to suit your needs.
The expense percentage should be the “what’s left” after you have calculated the others. If your regular expenses are more than what’s left then you know there is something wrong with your business numbers and you need to either increase turnover of decrease costs.
If you feel you need a bit of hand holding through this or numbers are daunting for you then we offer a package to help people with this method, you can find it here.