Where do i report my drawings to ensure i get paid by my customers
Where Do I Report My Drawings To Ensure I Get
Paid By My Customers?
February 27, 2009
As a business owner, where do I
report my drawings to make sure that
I get paid by my customers?
Many business owners think that
their share of the business is
drawings they can take out as and
when they need them.
Unfortunately this does not take into
account that this represents two
1. Wages for working in the business.
2. Dividends for being the business owner.
Many small business owners don’t count their time in the business as wages and
therefore run the risk of the following issues.
a. Their costs are not considered when calculating their sales prices. This
means their wage is not recovered in prices. Another way of saying this is;
customers are not paying them as an employee of the business even though
they work the same as everyone else.
b. Because they effectively have a zero wages cost it is impossible to get any
one else to work for them at that cost and therefore they are never able to get a
break from the business nor take a well earned holiday.
No matter how you choose to take money out of the business, make sure that you
count your wages cost when calculating sales prices. If you do not do this you may
actually be developing an unsustainable business model and putting a noose around
your own neck.
If you are looking for a breakdown between wages and dividends then use the
following rule of thumb.
1. Calculate what it would cost you to hire some one to do what you’re doing.
This is the amount of your wage.
2. Any amount over this is dividends from the profits you have created.
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