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How much do you keep out for business expenses?

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How much do you keep out for business expenses?

Post by Terina on Wed Oct 20, 2010 1:53 pm

Okay, I have been originally putting all my earnings back into the business to purchase, stage equipment for the magic and puppets, and make up...basically everything that we need to get started. It seems that we are getting to the point at least maybe after Christmas where we will have everything that we need. I will just be maintaining the business. Since the face paint makes us about 90% of our profits I want to make sure that I hold back enough to purchase everything I need and then a little for extra tricks and what ever else that may come up. would like some suggestions on how you guys do this for your business. I am a little nervous about keeping any of it to actually count as real income. Very Happy Can't wait to hear what you guys do...
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Terina

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Re: How much do you keep out for business expenses?

Post by Guest on Wed Oct 20, 2010 8:32 pm

On my books all income is recorded and all expenses are recorded. At the end of the year I show a profit. ALL income is recorded as income, how can you not count it as such?

I purchase as/when required, the bills are paid, the cheques are deposited...

As I am doing this part-time and have other full-time employment I am not working month-to-month or pulling income out as a wage.

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Re: How much do you keep out for business expenses?

Post by Perry Noia on Wed Oct 20, 2010 8:38 pm

I presume you are asking how much of the money that comes in should be going out in paying for materials? I don't track that part too much, just try not to spend very much... but when I was saving for Mooseburger Camp, I was putting 25% of every party into my box for it. The rest was money for paying for groceries and such.
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Re: How much do you keep out for business expenses?

Post by cattsy on Wed Oct 20, 2010 9:47 pm

I think I understand your question...

You're wondering, if you make $200 at a party, how much should you "bank" for expenses and how much can you spend on groceries, right?

It's kind of a tough call. don't have experience with face painting directly persay but I do have some business experience. How I would start off is build a "cushion fund" in a separate account, just for the business. I would bank half of what I made into there, until I had a good chunk sitting there, enough to cover any magor expenses that could come up, say maybe a thousand bucks. So if you made $200 at a gig, $100 goes in the bank, $100 goes in your pocket. You could adjust of course, but that gives you plenty for business expenses, and adds a bit to the household income, and then at the end of the year come reckoning you might have a nice little savings fund Smile

Of course at the end of the year, you'll have to do exactly what Shannon said, income is recorded as income and expenses as expenses, but it's a little harder to manage the actual cash flow without it coming out of your pocket. Splitting it 50/50 might be a bit on the high side to bank for something that typically is pretty low overhead, but at least then in this first year or so you're not caught short either and having to dip into your personal savings for business stuff if something comes up Smile

Once you get through your first couple of years and are making a good profit and have a better idea of what your ACTUAL cost of business is you'll be able to better gauge what you can take out of the business and what the business needs to run.

JMO
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Re: How much do you keep out for business expenses?

Post by pixieface on Wed Oct 20, 2010 11:13 pm

Also don't forget before the end of the year (say November) check your income for the year - you may prefer to spend some of that savings bank on big purchase supplies so you don't have to pay the taxes on it come April. It's just a timing thing and if you can afford the expenditure. You still have to make what you make to live on!
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Re: How much do you keep out for business expenses?

Post by avigailmilder on Thu Oct 21, 2010 12:08 am

everything the other gals said.. you will quite possibly show a loss on paper the first year. But whatever money you invest in the business you can pay back to your self, and it does not count as income. Most states, not sure if all, allow a business to function at a loss for 3 years.
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Re: How much do you keep out for business expenses?

Post by Psalmbook on Thu Oct 21, 2010 9:07 pm

I set 20% aside for expenses. This has been enough to replenish paints,balloons,glitter tat stuff & let me save up for any fun stuff. It also is used to buy any advertising(from vistaprint). I give 10% to God & the rest goes into an envelope for next months budget.
I have expense forms made up for each month & I log all income, expenses & mileage. I also claim the portion of the phone bill that covers my cell phone & a % of my Internet.
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Re: How much do you keep out for business expenses?

Post by Terina on Sat Oct 23, 2010 10:24 pm

This is really helpful. I do think I worded it a little confusing but, yes my question is how much should I actually keep to live off of as my "income"...I am just really used to sinking everything back in and we live off of my husband's regular job and then I teach some through the week. So, I wanted to put every dime into getting the items that we needed the puppets, magic, balloons, and the face paint of course...

So, I will take all of these great suggestions and see what I need to do. I have all of my receipts, I can't say that I really have written down everything at this point in time in a book but I have a folder with everything in it. I think my accountant would still show a technical loss since I am putting it all back into the business. I just wasn't sure the % because, I don't really have an accurate count for what I am spending at each gig per say, it just all goes back into buying something that we need. Maybe I could go back through and average it out or something? I know that most people go ahead and start living off their earnings. I had thought maybe 25% would do it, but, then I do think that if I did 50% at first I could keep a good cushion to grow from. Thank you all for sharing what you do in your businesses Very Happy
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Terina

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Re: How much do you keep out for business expenses?

Post by Fabtastic on Sat Oct 23, 2010 11:12 pm

I found Shannon's spreadsheet for how to calculate your cost per face to be extremely useful for a couple of reasons. You can find the link to her resources page in her signature line (see her post above).

It really helped me to think about the different expenses that I might face, even if they aren't applicable to me right now. I added a couple more spreadsheet pages to it - one to track expenses, one for income earned. When it is income tax time, I will have a fairly organized set of spreadsheets to help me out (yay!). And, the spreadsheets show me that I am already (believe it or not) at a stage where I can start pocketing some of the income I have earned, rather than rolling it all back into more supplies. To my surprise, I've more than recouped my expenses to date, and I don't have any big expenditures on the horizon. Next spring, yes - I will need to buy an EZup (among other things)... but I will just buy it, record it as an expense and that is that. In the meantime I am going to start paying myself by keeping some of that hard-earned money for myself!! Very Happy
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Re: How much do you keep out for business expenses?

Post by Guest on Sat Oct 23, 2010 11:51 pm

Yeah... I said at the end of the year I show a profit... NOW, I show a profit. My accountant is really good and manages to show me at a loss most of the time, bless him. Even if on my books I show I am in the black, once he gets through with it (depreciation on capital assets, pro-rata home office expenses, claims for northern living allowance, auto expenses as my RAV4 is registered as a commerical vehicle, etc.) I am not.

Which is a good thing tax wise. However, I have increased income year over year and have reduced expenses as well so my bottom line improves continually.

I showed a real loss for about the first 5 years. Now it is all in the books... but I do not pull a wage, nor do I have to live off those earnings either as I have a full-time day-job.

Keep your books properly is a hugely important thing to do - the spreadsheet I made will help and like Hazel did you can customize it to use for your general ledger. KEEP ALL RECEIPTS and copies of all invoices or monies received.

I think you do need to get your information into a proper form so you can determine your costs as only then can you figure out what you have left over to use for "wage" or other purposes.

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Re: How much do you keep out for business expenses?

Post by Terina on Mon Oct 25, 2010 9:43 am

Do you have a link to this form that you have made or is it something that you sell on your Website?
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Terina

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Re: How much do you keep out for business expenses?

Post by Guest on Mon Oct 25, 2010 8:42 pm

The spreadsheet is on my resources page - the link is in my signature.

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Re: How much do you keep out for business expenses?

Post by Terina on Tue Oct 26, 2010 9:24 am

Thanks!
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Terina

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Re: How much do you keep out for business expenses?

Post by Terina on Tue Oct 26, 2010 9:36 am

I just went right away and printed it off...I didn't know that you could get kit insurance? I was just telling my hubby this week that it would be nice to get insurance on our make up, props, magic tricks, and stuff. You know some of those puppets are $300 and up. I get my insurance through the WCA...how do I get kit insurance?
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Terina

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Re: How much do you keep out for business expenses?

Post by Guest on Tue Oct 26, 2010 7:38 pm

My kit insurance is an add-on to my liability policy.

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