15760 Ventura Blvd, Suite 610 Encino, CA 91436
FREE CONSULTATION818-436-2775
15760 Ventura Blvd, Suite 610 Encino, CA 91436
FREE CONSULTATION818-436-2775
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Personal, Affordable Payroll Services, Bookkeeping, and Tax Processing for Small Business throughout Los Angeles County.

Why Small Business Owners are Treated Like an ATM for their Businesses

It’s so exciting when you decide to start a new business venture. Especially, when it’s one that you love and can ultimately become successful in.

If you’re like most entrepreneurs, your business is your pride and joy. But sometimes, the demands of running a company can be so overwhelming that they can take over every aspect of your life.

You have so many responsibilities, and it’s easy for them to become mixed up in your head! 

One thing that often gets lost is the idea behind “paying yourself first.”

Usually, as a small business owner, you’re always the last one to get paid, or sometimes you don’t get paid at all! You keep shelling out money for everything like an ATM machine, leaving nothing left over for you. 

It’s frustrating but it’s just how things as a business owner go, right? Wrong! 

What You Need To Do Right Now To Stop This From Happening

PAY YOURSELF FIRST! That’s right. 

It’s vital that you pay yourself first. Why?

Because it’s important to set yourself and your business up for success!

Paying yourself first helps compensate you for the work you put into the business as well as building up your personal savings for the future.

But doing this first requires a certain level of discipline, which frankly is not commonly practiced as often as it should be. Leaving small business owners struggling to stay afloat.

How Much Should You Pay Yourself?

That all depends on the business numbers and not just the current ones.

You have to take a look at your accounts receivable to see how much money will be coming in. Remember that revenue and profits are not the same. 

There will be a substantial amount of expenses that will come out of your revenue including utilities; employee salaries; rent/mortgage; credit cards; car loans; tax obligations, (current and future) as well as other bills. What’s left over after everything is paid is your profit.

There are a couple of ways you can pay yourself:

  • If you’re not making a lot of profit, you can pay yourself the bare minimum to get by. This will help reduce your overhead as much as possible.
  • When your profits grow, you can increase your salary.

A few important things to remember:

  • Make sure to invest in good accounting software(one that keeps track of all your business transactions).
  • Pay yourself consistently at the same time each month, and a reasonable amount. Overpaying yourself can create a red flag for the IRS and launch an audit.

When you start a business, it’s so important to remember why you started it in the first place. Paying yourself regularly shows your commitment as a business owner and your goals for future success.

Remember, you do not have to do this alone. Contact your tax professional (hopefully us!) to figure out how much to pay yourself to keep your business on the right track for future successes and financial securities.