Shareholders need to understand not only how they’re going to get paid says Edmonton bookkeeping. But how much that is and when they can start paying themselves. That way, they can concentrate on growing the revenue of their business. Knowing that there is a finite plan in place. To get them paid a certain amount by a certain date.
In order to make that happen, Edmonton bookkeeping says that business owners needs to grow the revenue of their business to certain point. To allow them the opportunity to be able to do that. If they don’t have their revenue at a certain point before they run out of savings. They are going to needs to pay themselves with money that they could be using to grow the revenue of their business.
How a shareholder determines how much they’re going to get paid is an equation created by the accountant. Taking the very much does of the business into account. But also the personal circumstances of the shareholders at the time.
How they do that, is by looking at their personal balance sheet and personal income statement. Edmonton bookkeeping says that this is going to help the accountant figure out what’s the shareholders net worth is. Also, it will allow them to see what resources the shareholder has at their disposal.
The resources are going to be what the shareholder lives off of while growing the business. And how much resources they have will determine how long they can last, before they need to get paid. Shear holders need to understand this is Edmonton bookkeeping.
Because they may not want to use their savings to live. But if that’s what they need to do to grow a successful business. They will understand it if they counted points that out to them sooner rather than them discovering that later.
That’s also a great reason why they need to do the personal balance sheet and personal income statement ahead of time. Edmonton bookkeeping says that looking at the personal income statement will show a shareholder all of their expenses. Fixed as well as variable.
And they will be able to list their expenses. And see how much they can minimize their expenses. So that they don’t have to take so much of their savings each month to live.
This is ultimately the amount of money that they’re going to live on when the business can start paying them. So getting used to it by living on that amounts from the personal savings of the shareholder. Will help them get used to the idea before they start living on money they’ve earned from their corporation.
When shareholders understand exactly how much money they have to live off in their savings. They will be able to minimize their expenses. And I know exactly how much money they’re going to needs to draw from their corporation. When they generate enough Revenue in their business. They will know at what Revenue the business needs to be us. And they will know how much their shareholders draw should be.
Edmonton Bookkeeping | Understanding How Shareholders Get Paid
In order to help ease the minds of shareholders says Edmonton bookkeeping. They needs to understand that there is a plan on how they are going to get paid. Both in when that is going to be. If it’s a specific time. Or if it is a specific Revenue goal. And they needs to understand how much they’re going to get paid when it’s time.
When shareholders know this information says Edmonton bookkeeping. They’re going to be able to much more easily concentrate on growing the revenue of their business. However, working out the answers to those questions will happen at the beginning. When they are creating their business and marketing plan with their accountant Before they even open the doors to their business.
Are the accountant is going to do that, it’s not only look at the finances of the business in order to figure that out. They will also need to look at the personal circumstances of the shareholders. How they’re going to do that, is take a look at their personal income statement and personal balance sheet.
This will help the accountant to figure out what’s the personal net worth of each shareholder is. But also what resources they have at their disposal. That they would be able to live off of while they grow their business. Or, when necessary. Or to take that money out of their personal life to put into their business to help it grow.
The personal balance sheet according to attention but keeping his wife to list the assets as well as liabilities that are in the shareholders personal name. Asset might includes things such as their home, because that they own. And any kind of savings that they might have such as rrsps and tax free savings accounts.
Liabilities could be anything like the mortgage they owe for the home that they live in, vehicle payments, consumer. Such as credit card or an outstanding balance on a line of credit. It could even be things such as taxes owed to the government, or debt owed to family members for personal loans.
When the accountant subtracts the liabilities from the assets, that’s how much shareholder has at their disposal. To live off of or contribute to the business to help it grow.
The personal income statement is next says Edmonton bookkeeping. And it’s a list of all of the expenses that a shareholder has. This is a great exercise for a shareholder to go through. So they can truly see what are necessary expenses. And What expenses they can live without. Especially while they are growing their business.
Fixed expenses are first. And fixed expenses are all of the bills that they incur for services rendered. And are less easy to control. This might include things such as the rent or mortgage, vehicle payment, all of their utility bills. And also could include things like phone, internet and cable bills.
While these are very difficult to control. They can be minimized by calling the service provider and downgrading their service. Such as getting basic cable instead of premium cable. Or going with a lower phone package their phone bill.
When shareholders understand how much and expenses they can control. this will be in order to minimize the personal savings they spend each month when they are building their business. They’ll be able to understand how much they’re going to be able to get paid by their business. And at what Revenue the business needs to be pulling in for them to make that money.