Your point #1 sounds similar to the method outlined in Profit First[0]. Theirs is a bit more complex and has more accounts (Income, Profit, Owner's Pay, Tax, and Operating Expenses), but the theory sounds the same.
It's been a big help for my own business, especially for knowing that I always have enough for taxes. Money comes in to Income and it gets split up percentage-wise into the other accounts. I pay myself every couple weeks out of Owner's Pay, pay taxes out of the Tax account, pay my credit card out of OpEx, and cover shortfalls and/or pay myself quarterly from the Profit account.
Comments
Your point #1 sounds similar to the method outlined in Profit First[0]. Theirs is a bit more complex and has more accounts (Income, Profit, Owner's Pay, Tax, and Operating Expenses), but the theory sounds the same.
It's been a big help for my own business, especially for knowing that I always have enough for taxes. Money comes in to Income and it gets split up percentage-wise into the other accounts. I pay myself every couple weeks out of Owner's Pay, pay taxes out of the Tax account, pay my credit card out of OpEx, and cover shortfalls and/or pay myself quarterly from the Profit account.
0: https://profitfirstbook.com/