Setting Up Multiple Bank Accounts
The feedback from the posts I did on running a business was amazing! Thank you for all the emails!
As I suspected there a lot of people out there who feel very lonely running a business and it can sometimes seem like we're lost in a forest of white noise.
With some recent closures of iconic specialty cafes and independents and with crowdfunding of coffee chains rampant it can seem like your falling behind or what hope is there if these amazing coffee shops fail.
My feeling is these companies took on too much debt and tried to grow without controlled cash and cost/overhead management systems in place. Debt in a business can kill your business. Also if you have 3 stores that barely make a profit or are unprofitable, what makes you think 10 stores will fix this?! Then as they grow the number of stores it's hard to keep replicating what made that first cafe amazing in the first place.
Just focus on what you have and making that as profitable as can be and generating cash. Then hey if you save up enough to open a second or third store great, but you won't be jeopardising the whole business.
So I just wanted to recap and simplify two of the main concepts we use at Coffee Hit and I received most emails about. My hope is to inspire you to implement them into your business or even your own personal financial life.
The first is set up several bank accounts that cover the main areas of your business. These include:
- All Income
- Goods/Products/Service Staff
- Corporation Tax/ Income Tax
- Owners Pay
- Operating Expenses/Overheads
These sub-accounts cost nothing to set up. If your bank wants to charge you, then move bank. We use Barclays and they don't charge, we have around 10 sub-accounts.
Then all your money coming into your business goes to All Income. Make sure no payments go out of this account. All payments will come out of the other accounts.
Then on a spreadsheet set up % allocations. But start with Profit and Owners Pay first. Start with small %'s here then increase over time.
To help here is the spreadsheet we use at Coffee Hit. Ours is a bit more complex so I've simplified this one and this how we started.
Cash Allocation Spreadsheet
And really that's it!
Will take a day to set up, then the allocation is performed every two weeks. It's really that simple. But it will make managing your cash so easy.
No reason you couldn't adapt this to your personal life either.
I hope this helps you manage your cash and if you have any question just ask.
I'll post the next simple tip that will make your business more profitable next week.
For more detail buy the book Profit First by Mike Michalowicz