Today, I am here with Hetty Verney to discuss how to pay yourself more as a business owner. Hetty has been an accountant for 25 years. She helped business owners make sense of their numbers and make them work for them. She is a Business Mentor for the Princes Trust Young Entrepreneurs and she was told it was her divine gift to mentor and coach. In 2019, she came across a very simple cash management system called Profit First, which helped her put money aside for her tax, her pay and for her team so she never had to worry about having enough in the pot to pay her bills but most importantly paying her own salary (usually the last thing a business owner does) and rewarding herself.
A traditional accountant will look at areas that are really missing for a lot of people in terms of their finances. The main one being is, how can a business owner pay herself more. All business owners would want to pay themselves more, but instead, they pay too much corporation tax, or they haven’t been paying themselves anything. The normal formula for business is sales minus expenses equals profit. Profit is the last thing. That’s something that’s sort of forgotten about, it’s what comes at the end.
In managing accounts, every business owner needs an adviser or mentor one way or another. The strategy for Hetty is she goes through the accounts through the platform you use, be it Xero or QuickBooks. Then work out exactly what the corporation tax liability is looking like. Next is to work out at least halfway through the year looking at what’s going to be the best way of being tax efficient. Asking questions like, “do we need to put more money into a company pension? Do we need to set up a company pension? Do we need to pay ourselves more which obviously will increase the expenses and reduce the amount of corporation tax that we have?” With that in mind, the next thing to work out is what’s going to be the most tax efficient way for them to do that. Then, work out what as a personal tax, you’re likely to pay a second paying dividends so that they know in advance.
The most important employee in your business is yourself. So if you can’t pay yourself properly, then what’s the point of having the business in the first place. There are certain things that you can look at for a start, but also looking at your personal expenses to see what it is that you’re wanting, what it is that you need, is just taking that small salary and dividends enough for you, or actually do actually want to double that. So it is best to work out the most tax efficient way for you to be able to take that out.
Profit First, a cash management system where it’s a way of waterfowling money into separate accounts, so that you’re putting money aside for your tax. You’re paying yourself what you want, or what you need. And you are rewarding yourself. Not just paying yourself, but actually rewarding yourself for all of your hard work. But also that you have got a buffer in your business. If you’ve got two or three months worth of money in to pay for all of your expenses. Then it gives you peace of mind.
It’s a behavioral system more than anything else. It teaches you how to put yourself first – put your profits first.
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Facebook Page: https://www.facebook.com/hettyverneyaccounting
You can book a discovery call with Hetty here if you got questions or want to work with her.