By taking out an appropriate and consistent owner’s draw, you will make it easier for your accountant to manage your financials, forecast your cash flow, and prepare your taxes. Consistency makes it easier to budget and calculate how much money your business has. Here’s a recipe for taking out an owner’s draw that will keep your accountant happy. Bon appétit!

Before we get cooking, here are some helpful tips:

• Talk to your CPA to see if taking out an owner’s draw is right for your company. Not all companies can take an owner’s draw. Your tax accountant and CPA are there to help with financial decisions. Ask for their advice when determining a reasonable owner’s draw.
• Talk to your business partners. If your company has two or more owners, make sure you’re all in agreement about your draws.
• Don’t take any money out of your company other than your draw. Your monthly draw and bonus check are the only sources of money from the business that you can use for personal expenses. Don’t use your business card for anything personal.

If you’re ready to take a bite of a tasty owner’s draw process, let’s get cooking!

Process for Taking Out a reasonable Owner’s Draw

Essential Ingredients:

• Last year’s profit statement
• Accountant
• Calendar
• Personal bank account

Optional ingredients:

• Calculator
• Countdown to payday
• Somewhere to hide your business credit card—just in csae.

Directions:

1. Review last year’s net profit with your accountant so you can make a prediction about this year’s profit.
2. Sit down with your CPA to confirm your prediction and get their perspective on what your yearly owner’s draw should be. Make sure your draw isn’t more than your business will make in a year.
3. Divide the number by 12 to get your monthly draw.
4. Pick a specific day to receive your draw on every month. Have your accountant cut you a check on that day.
5. At the end of every quarter, reevaluate your prediction for net income (income minus cost minus overhead) and see where you’re at. If your business made more money than predicted, talk to your accountant about cutting you a bonus distribution check. If necessary, discuss a cutback with your accountant.

At Pretty Books, we are always whipping up new and helpful ways to keep your business moving. While there are tons of ways to prepare these processes, we believe that this one is the best. Enjoy!