10 Cash Flow Strategies for a Successful Business by Scott Richards - HTML preview
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Strategy 10: Reduce owner’s salary or drawings
One common problem in small businesses, especially those with poor financial reporting, is the owners withdrawing more cash than the business is generating. The owners may be taking a wage that is in excess of the business’s profit or may withdraw money out of the business bank account for personal expenses without consideration for future business cash outflows. This can destroy a business very quickly.
As the business owner you need to find the balance between reinvesting the profits to grow your business and enjoying the rewards of your hard work now. This balance will depend on your individual circumstances. A new business will need to reinvest more of its profits to grow compared to a mature business. I would recommend that a regular wage that is less than the expected profit is withdrawn and that the business account is not used for personal expenses. The regular wage should be based on a personal budget.