Bank Accounts for Beauty Business Owners
Mar 18, 2021
You finally opened that business checking and savings accounts, which means you're officially a business owner! Congrats babe! But, is this enough to run a profitable business?
Did you know that just having one, or 2 bank account is actually preventing your business from growing? Let me tell you why!
As a business owner it is important to have a strategy to organize and grow your business. This means, avoid overspending (do you have a budget in place yet?), and increase savings (plan for 6-7 months of operating expenses saved). Organizing your sales revenue and expenses correctly will help you reach these goals.
So, how can you run your business so you can actually start paying yourself consistently and on a schedule? Organize your expenses so you don't overspend and overdraw your account? Save for taxes so you're not shocked at that hefty tax bill? Grow your business?
Implement the 5 Bank Accounts Rule. Now, this isn't something new, or that I came up with, it's a strategy from the Profit First book (if you don't know what this is, I highly recommend reading the book ASAP!)
Now it's time to optimize your banking strategies with 5 accounts, and how to use them.
1) Income Account: This is where all your business revenue will go to. Service income, retail sales, any payments you received will go here. This is your income hub, and will be used to allocate money to your other accounts. Keep reading.
2) Expense Account: Here is where your business operating expenses are paid from. All your rent, dues, supplies, etc. can be paid out of this account. Why do I recommend this? Because you are forced to put money in here every month to cover these expenses, money from the Income Account above. By doing this, you are forced to be vigilant about your expenses, and helps to not over-spend. Making sense?
3) Owners Pay Account: I've said it before, and I'll say it again...START PAYING YOURSELF. Wether it's weekly, bi-weekly, or monthly, you are working for your business, and you deserve to get paid! Your payroll should be part of your expenses budget.
4) Tax Savings Account: Ugh...I know, not our favorite, but it's a crucial part of running a business. Wether you pay your taxes quarterly, or yearly, this account will hold your tax money so you're not blindsided by a tax bill. Let's put it this way; say you owe taxes at end of year and you can't pay it, the IRS will charge you late fees, interest and penalties for not paying on time. Eeeek, no thanks! Start saving now! You want to put about 20-30% of your profit in here*.
5) Business Profit Account: This is kind of like the leftovers account. Once you've paid all your expenses, you put money in your tax account AND you've paid yourself, what's left is your business profit. Don't leave it in the Income account! Why? Because it's easy to overspend. Use this account as a savings for growing your business, upgrading equipment, or finally take that class you've been eyeing.
So, now that you know how to organize your finances, what steps should you take? Log in to your banking system, and open the accounts you need. But don't stress babe, it's ok to not have all of these in place, you'll just have to work a little harder to make sure your finances are in check.
Don't forget that I'm only an email away, so don't be shy if you have any questions, send them my way.
xoxo,
Cecilia
Your Beauty Biz Advisor
Don't forget to follow me on Instagram and Clubhouse @ceciliawiscomb
