How to properly withdraw money from business

2024 Author: Malcolm Clapton | [email protected]. Last modified: 2023-12-17 03:44

Financial consultant Sergey Ivchenkov - on how to get what you own from your business without harming the company.

Not every owner knows how to withdraw money without harming the business. Some pull everything and do not leave the company either for development or for current needs. Because of this, entrepreneurs fall into cash gaps and drive businesses into debt. Others, on the contrary, are afraid to take too much, so they are unhappy: they work a lot, but little money.

Let's figure out how to get money out of business correctly.

Separate personal wallet and business money

Stepan opened an advertising agency. He believed that the cash balance at the end of the month was profit. And he constantly took from these funds for his own needs, not thinking how it would affect the company.

There was a constant lack of money: sometimes there was nothing to pay for renting an office, then for communication, then for advertising. Delayed wages and paid installments were common practice. After all, Stepan managed to spend the withdrawn money.

The situation when the time has come to pay, but there is nothing, is called a cash gap. It is unpleasant that because of it the company cannot fully work, because there is no money for current needs. We have to borrow and interrupt until the next income.

This went on for six months. And then the company went bankrupt. Stepan's mistake was that he did not distinguish between his personal wallet and the firm's money. In fact, Stepan has a specific role in business - the CEO. Therefore, it was logical to assign yourself a market salary as a director.

Calculate your profit correctly

Often, owners calculate the profit based on the balance at the end of the month. What lies, then earned, you can take. Profit is not really an account balance at the end of the month.

Profit should be calculated according to fulfilled obligations. The prepayment from the client is not your money yet. But when the deal is closed and the documents are signed, the money is yours.

Calculate the proceeds from closed acts, subtract from it operating expenses, taxes, interest on loans and depreciation - that's your net profit. You can't take her out of business anymore.

Plan the movement of money

The profit was calculated. With a pure soul, on April 1, they took the money, and on the 10th it is necessary to give the salary and pay the rent. There is no money - that's the cash gap. In order not to get into such a situation, plan the movement of funds for a month in advance.

To do this, use the payment calendar. Enter in it all the planned expenses and receipts of money to the account. So you will see at what point you will not have enough funds to fulfill obligations. Leave so much money at the box office to avoid hitting the box office.

Payment calendar template →

If there are 300 thousand on the account on August 1, then there will be no money from August 4 to August 8. You may need to set aside some amount to avoid hitting the cash gap.

Since we saw the upcoming cash gap, we insured ourselves and reserved 400 thousand rubles. This solved the problem: there is enough money from 4 to 8 August.

Leave for development

The profit was calculated, the movement of funds was planned. It seems that you can take free money. But it’s too early, the last step remains. Business needs money for development. There are three scenarios for deferring:

• All to yourself. Take all the free money. The business does not receive investment, it has no chance of growing into something larger. But if there are no such plans, the strategy is acceptable. The company will mark time, and you will live for your pleasure. True, there is a risk that competitors will be bypassed and the business will be less profitable or unprofitable. Then you have to close it.
• Everything is in development. You do not take a penny out of the business, you invest everything in development and even add from your personal savings. So you will return the investment only over time, but at the same time you will become the owner of a large and profitable company. Until then, bear with it.
• Compromise. This strategy allows taking into account the interests of both the owner and the company. Entrepreneurs adhere to the rule of the golden mean: they spend 50% on development, and take the other 50% for themselves. But you can choose other proportions.

Before taking money out of business, assign yourself a salary according to the market, calculate your profits, plan the movement of money and set aside for development. You can take all that is left.