How to extract cash from your business9 Mar 2020
Taking money out of your business - how, why, when and when not to
One of the most common problems faced by small business owners is knowing how and when to extract money from their business. And most importantly, how do you record personal withdrawals from your company in the most tax efficient way?
How much profit should you take annually?
The first thing to do is to make an estimate of the amount of cash your business is likely to generate in the coming year in your business plan.
A good place to start is by looking at your expected revenue, deducting your anticipated operating expenses and allowing for corporation tax. If you have any bank debt, you should also make an allowance for any interest you have to pay, and if you are a retailer or manufacturer you may also need to make an allowance for changes in inventory, trade debtors and creditors.
Once you’ve made these estimates, you should then be able to make an estimate of the amount of cash likely to be generated by your business. If you’re not sure about any of these figures, it is best to err on the side of caution, so that you don’t end up distributing more cash than you end up generating.
You need support extracting cash from your business or just need some general advice, speak to our business accountants for support.