Harriet, hello and welcome to voice notes from your CFO. Bestie, I'm Harriet Formby, your fractional CFO and holistic business mentor, bringing you money chats, pep talks and financial know how that's practical, relatable, and actually feels good. Whether you're a business owner, a founder or an entrepreneur looking to get a handle on your finances, I'm here to help you make sense of it all.
Today I'd like to talk about something that comes up quite a lot for us in business, and that is how to tell if the money in our bank account is money that we can actually pay ourself and use. It seems funny, because it's our business, and so it's our money, but the thing is, a common mistake that people can make is just kind of assuming that if there is money in the account, that you can kind of go ahead and spend it. Or the other side to this is you're so unsure of what else needs to come out of the account, or what else you maybe haven't considered that you are nervous to actually touch the money in the account and make a mistake.
So we're going to get into, actually, yes, some tips and ideas of what you can do, things to think of really as well, to have confidence that you know what you can and can't do with the money in the bank. In order to know that you are kind of being intentional and sustainable for future months and obligations, and particularly if you are new to being self employed, something that can catch you out is not setting aside money for your taxes when sort of tax bill time comes around. And this is a great tip, whether you are new to the world of self employment or you've been in business a couple of years, and that is to set it so that when you know money comes into your bank account. So maybe customers pay you, or you receive funds
for other sort of trading things that you actually set some money aside. So, you know, a good sort of general estimate maybe would be to say, put like 30% aside for taxes. Now I'm being general here, and this might depend whether you're, you know, self employed limited company, whether you're that registered or not, etc. That's, you know, another story. But that's a good starting point, really, is to put, put aside, say, sort of 30% of of what's coming in, and that can go into, like, a separate savings account if you've got one of these kind of new challenger banks like Monzo or Starling, you can set up rules so that automatically happens for you. And that can be, you know, quite helpful then, because you can kind of think, well, at least, I know, you know, when you're looking at your main current account, you can think, well, at least I've got that money over there in that other account for tax. So that gives you some comfort. It can depend on cash flow.
You know, if your things are a bit tighter, you might be sort of thinking, actually, that's quite difficult to do, but it's something to kind of get in the habit of doing, yeah, as a routine. So if we have actually imagined then that we have received a large sum of money and it's come into our current account for our business, we have then set, say, 30% aside for taxes, automatically. And the other thing to then think about as well is getting, like, a handle on your what expenses are actually going out of your bank account. So how long is it going to be until you get another chunk of money in and how, what, what is coming up in the meantime. So here, it's really important where you can to know in quite good detail, kind of what, what are your regular expenses, and maybe one off expenses that are going to be coming out, and tracking these in some sort of format. So this is called Cash Flow tracking.
And something, if you haven't got, you know, an approach or a template already, something you can do is, if you sign up to my email list, the first email that you get pinged back is actually a cash flow template. So that's a simple way to go and help yourself to a cash flow tool that I have got available for you to use for free with a bit of training on it as well. It was a training video there, so that could be something that would get you started on to approach that. And that can be really helpful. Then yes, to basically mean that you can start tracking like what you need, basically to cover your regular bills, you know, subscriptions, regular costs, maybe, maybe payroll, if you're a slightly larger business already. And the other thing then that can be really helpful is to also treat kind of like paying yourself as a new as the the business.
Owner, if you are taking, you might not yet be taking, like an official salary as such. And if you're sort of sole trader, that doesn't necessarily mean that that you know that is a thing, but actually because you probably have, you know, regular outgoings yourself, living costs, mortgages, rent, you know, transport, running costs for your vehicle or getting around the place, and general groceries and all of that stuff that tends to go out, kind of monthly, weekly, as you go into the shops and things, it's really good to get an idea of, like, what is it you actually need to, you know, to pay yourself to cover the regular stuff, if your business is actually covering, you know, if you're living costs, and then to be able to pay yourself a regular wage so that you actually know, yes, it's this much that, you know, I need to ideally draw out of the business each month.
And that means, then that is just one of these kind of cash flow things that is going to be something that you hopefully will plot through, so that you can take that and it, you know, it depends on what stage you're at, whether you are fully drawing wages and things. And obviously, if you're a limited company, you might well be, you know, looking at having a salary and a dividend structure, and that's a slightly different thing. So I won't get into all that detail today, but perhaps we'll, we'll visit that, you know, as its own topic in the future. So so far we've touched on, you know, once you set aside something for, you know, your tax bill, you're then going to have an idea from, you know, mapping up, like your cash flows in and out, of what, what your regular payments are, what you, you know, like to pay yourself each month. And that's going to give you an idea, then, of how, if the amount in the pot, in the bank account, that's come in, how that matches up and what, what's kind of extra. And from here, it can be useful, then to have a bit of a structure with your bank accounts, so these can be labelled in quite a sort of personal to you way.
So you can actually have, sometimes it's helpful to use, like, keep a set amount in your current account, and then keep sweeping the money out of it. So you might be putting it into savings account for your tax pot. You might be putting it into, you know, an amount of money that you're like going to pay yourself later in the month, or that's allocated for other wage, other bills and expenses and things.
And you might also want to kind of put together, like, if you are, you know, saving up to do something in particular in your business, then you might want to, like, you know, next, in the next few months, I'd like to buy a laptop. So you might stick a few 100 quid in each month as you're building it up, and then get, Oh, brilliant. I've got 1500 pounds now I can go off and buy my laptop. If you were buying it, you know, you could obviously buy it in other means. But if you were kind of, you know, had a particular goal of something you wanted to purchase, that's another way of doing it and making it kind of personal to to your setup. And what this means then is then, rather than looking into your bank account and saying, like, one balance and thinking, I don't know what I can do with this amount of money, or if I you know what I should be setting aside. Now, you're going to look in there and you're going to see a pot, maybe with some tax in it that's building up. You're going to see a current account with, like, just a residual amount that's going to cover anything, you know, expenses that are regularly going out, perhaps.
And you're going to have these other savings pots and things that have got stuff that's maybe labelled for specific projects or things that you want to allocate the money to, and also, you know, potentially for your future, you know, for kind of paying yourself in the future. So maybe it's the money's gonna last a few months, so you might put that money aside, and then you'll know what's actually extra or leftover or what perhaps you could take a bit more, you know, then, you know, when those things are covered, you can maybe take out a bit more. So really, it's about being, you know, quite close to your numbers, so that you know what to expect, almost what's gonna you know, so you're not getting any surprises of what's suddenly going out the account, or any gaps in income, as far as you can. It's about, yeah, thinking really of, sort of setting aside money for taxes, tracking your expenses and keeping separate pots or bank accounts, so you've got a bit of clarity then of what's going on.
And as I said, if you want to have a play around with that cash flow template, and this can be really great just for, kind of, generally, just planning, you know what's coming up.
It's something that you can get basically, so I'll, in the show notes, I'll link to my email list sign up, and it's just got, there's basically a freebie that pops through when you sign up, and you'll get a link through in your email to the cash flow template. If you want to try that went out. It's a good if you haven't used any sort of cash flow templates before, it's a good, I guess, introduction that you can then maybe move on and create things that are more tailored to your business.
But most people, I find that actually have a go with, you know, mapping out their cash.
Flow. Feel really calm. They suddenly feel in control of lots of things, and it can be a really nice exercise to go through.
Yeah, so give it a try.
