Self employed - how to pay ourselves a wage.

[Killter]

Hi guys,

Myself and my wife are having trouble managing our income.

We are self employed and work for ourselves in our small business.

We can't decide how to pay ourselves a wage, in order to budget for the month and how much we can save.

The added problem is that we receive small payments from a lot of customers throughout the month. Some pay on time, others dont. Added to this is we have better months than others, for example August is terrible month financially and October is a good month.

We dont have a lot of business overheads as the work is online - no rent, staff etc to pay.

Some suggestions:

1.When a payment comes in pay 15% immediately into a savings account, and the rest is our money for the month to live off.
2. Decide to pay ourselves say 3000 a month as our salary, but the problem with this is we dont often have this all at once in the account as the money comes in in dribs and drabs.

Any suggestions welcome.

Thanks.

 

[Brendan Burgess]

How long have you been in business?
I presume you are not operating through a limited company?

Do you have accounts for the last few years? These should tell you how profitable your business is.

You need to distinguish between cash-flow and profit.

What happens in any particular month is not really important, especially in a seasonal business.

You don't seem to have any creditors which makes it easier to manage.

You need to build up a reserve

• to allow you to draw down a regular monthly amount
• to pay your tax in October
• to pay down your mortgage and contribute to a pension

Brendan