A Budgeting Tip for Shop Owners
Sometimes shop owners feel like they can’t save money for needed items. Here is a suggestion that may help:
Consider opening separate bank savings accounts for all potential expenses you’d like to have money saved up for: Equipment, New Location, Taxes, etc. Then set up weekly automatic transfers into those accounts (Fridays or Mondays). Here are some examples:
a. Equipment – $250 per week. Make a list of equipment and estimated costs, prioritized in order of need, i.e. 1)Exhaust Hoses – $800, 2)Transmission Jack – $1500, 3)Welder – $1500, and so on. Keep transferring money into your equipment account, and once you have enough in that account, buy the equipment using cash. This account will continue for 52 weeks a year because you will always need equipment or repairs on your equipment. If the account gets higher than you think it needs to be, cut back the amount you transfer.
b. Taxes – Estimate your tax liability and how much your quarterly estimated taxes will be. Let’s say it’s $5,200 per quarter. Since there are 13 weeks in a quarter, you would set up an auto transfer for $400 per week ($400 x 13 = $5,200). This way when the quarterly estimate is due, you’ll have the money set aside in the account to pay for it, and will just need to transfer the necessary amount back to your operating account and pay the tax bill.
c. If you’re saving up for a new location, consider using your current Savings account as the New Location account. Similarly, set up an auto transfer of $500 per week (if cash flow allows) into this account. After 2 years, you’ll have $52,000 saved! That’s a good start towards a new location, moving, etc.
This article was contributed by Randy Pickering, one of the top shop owners in the country who helps other shop owners reach their goals through the Elite Coaching Program.