3 Reasons for Founders to Expense their Salary from Day One

It is common for Founders and Directors of start ups to not draw a salary and even be putting their own money into their business while they get their idea off the ground and begin to generating revenue.  However even if a founder is not drawing a salary from the business bank account, it can pay to include a notional salary in the Company Accounts.  Here are three reasons why:

1 To Understand True Business Performance

By including a notional salary for yourself in your businesses profit and loss you will have a true understanding of how much money you need to make to run your business.  Equally at the point where you do decide you want or even need to draw a salary, it will avoid an unexpected cost appearing in the accounts.

2 Motivational

Placing a value on your own time from day one and watching the figure owed to you accrue in your business accounts can be motivational, encouraging you to persevere and grow your business to a point where you can start to draw on this unpaid salary.

3 Avoid Unwanted Questioning

When you business is in profit and able to pay your salary for the years of unpaid work you have put in, no one can comment on you suddenly taking a large chunk of money out of your business, particularly if you have new investors on board.

Related:

What is an Accrual?

What is the Directors Loan Account?

Anita is a Chartered Accountant, turned blogger, with over 10 years experience in accounting, tax and operations for Small Businesses. Anita is on a mission to make finance simple for the self employed, so they can stop stressing about their business finances and focus on building profitable businesses which will give them the lifestyle they dream of.