Martwayne | Power Through Fashion: Money Matters: How to Pay Yourself a Salary as a Small Business Owner & NOT Feel Guilty About It!

Wednesday, February 25, 2015

Money Matters: How to Pay Yourself a Salary as a Small Business Owner & NOT Feel Guilty About It!

Image from http://scoopak.com/wp-content/uploads/2013/12/Salary-of-the-Month-Funny-HD-Wallpapers.jpg

I thought this picture was hilarious when I saw it.  But the reality for many of us business owners is not that funny.  Many of us are struggling to keep the business afloat that the last thing on our minds is getting paid at the end of the month!  

I personally dread month-ends - and I am sure every business owner does to.  In fact this is the only time I wish I was still working for obvious reasons.  That is when your bank account that you have struggled to build up during the month takes the hardest hit!  Can be pretty destabilizing.  And the worst thing is, it has to happen every month! ;-(  

And like there is nothing even more worse than the worst thing, YOU - the person who does most of the work does not get paid!  :-( :-( :-(

And even more worse than what is worse than the worst thing - you get accused by so-called business-people of dipping into the business funds to try and maintain your basic needs.  Yes can be quite frustrating right?!

NOW!  Don't get me wrong...
Image from http://www.careerealism.com/wp-content/uploads/2013/10/Negotiate-Salary-Without-Pricing-Yourself-Out-Of-The-Job.jpg



Many small business owners are guilty of that because many lack discipline.  Many fail to distinguish between personal funds and business funds.  Heck!  In fact many do not even have corporate bank accounts and those who do are not disciplined enough to ensure every inflow goes straight to the bank account.  No wonder at the end of the month, we have no idea where all the money we made went to.

I also had this problem in the early days and only realised it had to stop when I was asked to submit my bank account for something I had applied for and was totally embarrassed by the fact that I had no records whatsoever.

Only then did I know I had to make things right!

Anywayz... the time to pay salaries is around the corner and yet again we (the business owners) will shortchange ourselves yet again.  Someone did ask me this question on Monday so I thought I should post something I posted on a Facebook group on how to pay yourself a salary without feeling guilty at the end of the month.  

I have literally copied and pasted it (with tiny edits here and there).  This works for me and hopefully it will work for you as well. 

Image from http://www.centonomy.com/salary-does-it-work-for-you/

Here goes...

___

"On the personal / business finances, this is my take on it.

Many accuse business owners of dipping into the company's purse but I can safely tell you it is the business that actually takes from you. 


I put every dime I had into my business, even money I made from other sources. If I wanted to be strict, I would say other sources should go to me directly not into my business. It does not work that way.

Those who say they never touched a dime probably had people footing other bills for them. I had no one footing mine so who would pay my rent, feed me as a single lady, pay for my petrol and meet other personal needs if not my business? I could not keep running home to ask my parents for money. 

In fact, I stopped asking them for money and started taking loans instead from them which I paid back. And when I paid back, I became settled that yes I was indeed running a business.

This is what I tell my students and people who ask me for advice.

1. Every business income must go straight into the account. For that reason, I hardly take cash and ask people to pay directly into the account.

2. The truth is, you can never really pay yourself salary until you get to a point because you will only end up using it for a business expense.

3. Determine how much salary you think you deserve and then also give yourself a realistic nominal value based on what your business can afford. Eg. You are a CEO so maybe your salary should be n750k per month BUT your business can only afford N50k. That extra 700k should be recorded in the books as what your company is owing you which will help give a basis for the valuation of your business should you want to go limited and sell some shares.

4. With that 50k, you will probably still use some of it for the business so it is a tall order so this is what I do. 

I don't spend much on myself so it is easy for me to track my finances. I have a book I record it in.

If I ask my assistant to get some petty cash for the office and say I ask him to buy me something to eat on the way back, I will record that expense as a personal one in my book. 

At the end of the month, I will compute all personal expenses and if it exceeds that 50k, I know next month, I must take out that extra.  Simply put, if I have overspent by say 20k the previous month, this means I can only do say 30k personal expense this month and vice versa. If I have not spent up to 50k, it means the office owes me but rather than take it as cash, I add to that 700k.

It takes a lot of discipline but it does work. That way you do not feel guilty when your salary pays for a sausage roll or a movie ticket. After all, why am I working if the business cannot meet my needs.

I am not talking about 250k Gucci bag needs o. I used to be a Jewellery person before but I don't do much Jewellery anymore because I am running a lean means approach to everything. 

If I need something that I cannot afford, I ask for it. I will pray about it and put it on my BB and funny enough, a friend obliges. That's how I got my iPad mini as a wedding gift and so many other things I use in my business - things I would not have bought for myself.  I am never shy to ask if I need something.  Worst case scenario, I will get a NO.  

But I am allowed to enjoy the fruits of my hard labour. I feel if your business cannot meet your basic personal needs, then you are not running a business!"
___

Great!  

That is what works for me!  Remember, DISCIPLINE is key!  You MUST go around with a pen and paper ALL THE TIME and do not say, oh I will update it later.  When you withdraw from the ATM, write it down in the book and state what exactly you use it for real time.  Whilst buying petrol, write it in.  Whilst on the bus, write it in.  You will be better off for it.

This is what my book looks like and it only costs N300 or so.  It needs to be small enough so it does not weigh down your bag.


And each page must have: Date / Description / Amount.  If yours is big enough, you can add vendor (i.e. who you gave the money to).  NOTE that this does not replace your company's expense register.  You should reconcile this with the company's.  I include both corporate and personal expenses in this one and do a reconciliation when I can.

Okay!  I think I am done with this!  Please feel free to ask questions if you have any and I will be happy to help you out - preferably in the comments section below.  It would be great if you help others out with your questions so everyone learns from it.  I often find people asking me questions privately and I wish they could post it on the site instead.

Before I leave... I think you should read this piece I stumbled upon when looking for a picture... 


I thought it made a lot of sense.


Moving on to other stuff...  

Don't forget the Short Fashion Course for Beginners starts on Saturday, the 28th.  Registration is still on and I look forward to seeing you guys there.

Here is the link:


PLUS:

March is here and we have 3 great courses lined up:

-  Short Course in Bodices, Shirts & Dresses;
-  Short Course in Design & Illustration; and
- A Fashion Entrepreneurship Course, Volume 8 on "Dealing with Horror Customers in Your Fashion Business".

FEC 8 is long overdue and I am eager to run it.  I have a plan on how people outside Lagos can also be part of this Course and will share the details of all 3 courses as soon as I am done with the flyers.

Enjoy the rest of the month and wish me a HAPPY BIRTHDAY in advance! :-D  

2 comments:

  1. thank you for this wonderful piece

    ReplyDelete
    Replies
    1. Pleasure Yinka.

      Hope you'll be joining us for FEC 8 on How to Deal with HORROR Customers in Your Fashion Business.

      Keeping my fingers crossed :-D

      Delete

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