An Easy Path to Paying Yourself.

Show of hands, business owners: Who is not ensuring that they pay themselves every month?

Let’s be honest. It’s a very easy trap to fall into. We strive to be timely in paying vendors, we make sure we have the funds to cover payroll, then we leave the rest sitting in the business bank account for the occasional disbursement. Depending on the structure of your business, you may be on payroll, but for many small businesses, it’s not uncommon to live by the owners draw, taking funds here and there but never truly being consistent.

While it is natural to want to squirrel all the extra cash on hand away, ensuring you are consistent in paying yourself is also extremely important. Your time is valuable and when running a business, you are devoting a great deal of that time to its success. But your employees do not work for free, you shouldn’t either. There are many methods and programs out there that run through often complicated systems for ensuring that you are profiting from your efforts, but in the end, the best system or method is the one that you stick with.

Consistency is key.

The way that I found that works best for many of our clients is deciding on a percentage – not a fixed number. Some months are better than others, a seasonal business especially, could have fairly large swings on monthly profit. So instead of the (sometimes overwhelming) commitment to a fixed amount, focus on a percentage instead.

While calculating the percentage, match the amount for another draw into a savings account. Tuck it away – I personally am a fan of having it at a different bank than my operating account… out of sight out of mind – and watch how fast your rainy-day buffer builds.

How do you decide what percentage to use?

This is where well maintained, up-to-date bookkeeping proves itself to be invaluable. You cannot make educated decisions on your finances if they aren’t in order. A balanced set of books is the starting point for a well thought out budget. Budgets that include paying yourself AND saving for unforeseen expenses. Win win.

Remember – it doesn’t have to be a massive amount at first. Get yourself comfortable with the idea. For some business owners, this is a hard adjustment. No one says that you have to spend the money either. It’s okay to put your pay into another out of sight account and let it grow – this way you still have that cash on hand feeling but you have also acknowledged your hard work and commitment to your business.

But ultimately just please know that it is absolutely okay to pay yourself. You should and I hope that you do!