How Can I Safely Take Money Out of My Business?

When your business is making a profit, at some point you may want to withdraw money from your company’s account. However, sometimes it’s hard to estimate how much is safe to take out. Let’s take a look at some ways that would help avoid a negative impact on your business.
12/03/2022
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Experience has proven that there are two types of owners:
  1. Those who believe that all the money their business has is theirs. They tend to take out however much they want which usually results in cash gaps.
  2. Those who are hesitant to withdraw any. It leads to having a feeling of working too much with no result.
However, these are not the only possible scenarios. If you relate to any of the groups, here is an instruction for you.

Separate personal and business finances

One way to do it is to set the salary for yourself. By the way, if you work as a CEO and as a Marketing Manager, make sure you are paid for both positions. In this case, when you hire a Marketing Manager, it will be clear how much they will be paid.
Besides, different credit cards can help with that. Make sure you know the difference between your personal credit card and the one used for business purposes.

Keep track of the revenue

If you have extra money at the end of the month or quarter, it doesn’t mean you can withdraw it. For example, some of it can be an upfront fee. This money only can be yours after you have taken care of the liabilities.

Take a look at your P&L statement. Your revenue only becomes profit when you take off production prime cost, operating expenses (rent, salary, ads, etc.), depreciation, taxes, and bank loan interests.

Then you can see your net income. This is is the money you can use to take out dividends. However, you can’t take out more than what your net income is.

Calculate the dividend payment

You are free to take out all of the net income. However, it means that your business won’t have the resources to grow and develop. It’s advised to do that only if your business is stable enough.
If it’s not the case and you are still developing your business, it’s safe to take out 30% leaving 70% more for development and reserves.

One more way is the 50/50 approach: some kind of happy middle ground.

Plan your cash flow

Sometimes it’s safer to think about the future. When you calculate how much you are withdrawing, make sure you won’t have to face payroll with no money left.
Add your dividends payment day to the payment calendar. That would help you to see if it’s safe for your business.

To sum up

  1. Separate personal and business finances;
  2. Set a salary for yourself considering your input;
  3. Keep track of net income to avoid withdrawing too much;
  4. Calculate the percentage of withdrawal;
  5. Add dividends to your payment calendar.
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