How much to leave in business account
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Charityworker
Posts: 989 Forumite
I'm an event organiser of daytime events such as craft fayres, farmers markets etc. What started as a hobby grew into a full time self employed job. So my question is what percent of my profit do you suggest I keep back in my account to cover expenses? At the moment I'm keeping 10% back but I don't know if it's right.
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It all depends on your level of profit. If someone is earning £1000 pa profit, then £100 is probably not enough to cover expenses. 10% of a £10000 profit would mean £1000 in the account.
I would suggest that you were out your monthly commitments (mobile phone, accounting fees, etc) and times it by three. That means that if the push comes to the shove and you have a bad three months, then you know that your business costs are covered.Eat vegetables and fear no creditors, rather than eat duck and hide.0 -
I keep about 3 months in a designated account to be used if we're short.
Generally it gets dipped into in January and June (slowest month and huge marketing/vehicle rental expenses in preperation for summer respectively), and replaced as soon as reasonably possible.
We are an events company, but music events rather than what you're doing.
Hope this helps.💙💛 💔0 -
You certainly want to keep sufficient in there that you don't inadvertently go overdrawn and get hit with large bank fees. In any case there is little point in shunting money in and out of a current account into savings accounts with such low interest rates.0
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You certainly want to keep sufficient in there that you don't inadvertently go overdrawn and get hit with large bank fees. In any case there is little point in shunting money in and out of a current account into savings accounts with such low interest rates.
True re interest rates, but there's a lot of merit of having separate savings account(s) for tax, VAT, contingencies, etc., so that your finances are more visible, especially if you don't have decent book-keeping software that's telling you your running totals for taxes etc. Far too easy to "Rob Peter to pay Paul" when you've a lot of business transactions, and also easy to think you're making money when you're not due to liabilities etc building up in the background such as taxes.0 -
Do you mean line of business expenses, or annual overheads including corporation tax and accounting fees? The latter can very easily be well over 10%0
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Charityworker wrote: »I'm an event organiser of daytime events such as craft fayres, farmers markets etc. What started as a hobby grew into a full time self employed job. So my question is what percent of my profit do you suggest I keep back in my account to cover expenses? At the moment I'm keeping 10% back but I don't know if it's right.
Why don't you know if it's right?
If you are saying you regularly are finding the amount left in the account is not sufficient to pay the expenses , then you are taking too much.
If on the other hand, you always have more than enough to pay your expenses, and the balance is ever increasing, and you'd like to spend some - go ahead!
But this really isn't the way to run a business. Seek expert advice/support on how to financially manage your business.0 -
Thanks for your replies.
It seems no matter what you ask on this board someone has to come n to have a go!0 -
Who 'came and has a go'? I'm not sure I understand! I think you've had some very valuable comments rereading the thread0
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Are you wondering about what to keep back for business expenses, or what to keep back for your eventual tax and NI bill?
You've been trading a few months now (not sure how long), so you may be due to submit a tax return by the end of January. I'd get that sorted sooner rather than later in your position.
(If you didn't start trading until April or later this year, you've got another year.)
Getting to grips with a spreadsheet where you can do 'what if' projections is definitely worthwhile!Signature removed for peace of mind0
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