Let’s first start with the two checking accounts you will need before opening up any business savings accounts (Envelopes). If you read my blog post, “The Next 7 Steps to Starting a Weekly Pool Care Business. Part 2” I wrote in detail about the two business checking accounts you need to open. Assuming you have decided to work with QuickBooks. I encourage you to go back and read that post if you haven’t already. The business checking accounts act as your business operating accounts however the QuickBooks Checking account will act as your main operating account. It is used to receive payments and manage the day-to-day business transactions. The second business checking account will be a backup for mobile check and cash deposits and should be opened with a local bank that offers FREE Business Checking. My wife and I both work with First United Bank in Texas. We are not sponsored by them, but they have been amazing people to work with. The entire staff are relationship builders and I like that.
When setting up QuickBooks you will be asked if you want to open the new QuickBooks Checking account. Please click yes! This will give you the ability to also open up what Intuit calls, envelopes. In this blog post I will be covering the 5 envelopes (savings accounts) you need in your pool care business.
Give your mind less stress and your give your money purpose. Effective money management is the foundation for any successful business. Here are the five envelopes I have set up in my business. I am going to separate these into Entity Type only because the envelopes will be named differently if you are a Sole Proprietor or an LLC vs if you are a single member LLC taxed as an S-Corp.
5 Savings Accounts for a Sole Proprietor or Single Member LLC
1. (Owners Draw) Envelope: This account is used to hold funds to pay yourself for working in your business. It helps keep your business and personal finances separate and simplifies the process when it comes time to transfer that money into your personal checking account. I suggest having 6 months of your expected owners draw in reserve at all times. When I first started my business, I transferred 35% of my revenue into my Owners Draw Account. I transferred money into my personal checking account as needed. Thats how you pay yourself as a sole proprietor or a single member LLC.
2. Profit Envelope: This account is for setting aside money as your business makes a profit. If you leave that money in the operating account, it’s far easier to spend. Allow this money to accumulate over time. It will be available when you want to pay out a dividend, purchase new tools or assets, reinvest in business growth, or taking a bonus at the end of the year. When I first started my business, I transferred 2% of revenue into my profit account. Yes, it was small but that is how things begin to grow. Remember, the percentages are fluid. As your business grows you can and should increase the percentages being transferred into your envelopes.
3. Sales Tax: I set all sales tax money aside in what is called the sales tax envelope. That money gets transferred twice a month into the sales tax envelope. My sales tax is paid monthly. My accountant sends me a reminder email every month to tell how much is coming out and when I need to have that money transferred back into my business checking account for the payment being made to the Texas Comptroller.
4. Tax Envelope: Not all of the money you bring in belongs to you. The tax man comes every year just like Christmas, and you need to be prepared to pay up. There’s nothing worse than getting a call from your accountant with your tax bill and you have no money in the bank. Your tax account is where you will transfer a percentage of your revenue into the tax envelope and leave it alone. That money needs to stay put until it’s time to pay your taxes which comes every April. When I first started as a single member LLC, I set aside 25% of my revenue into my tax account. I met with my accountant several times during the year. At the end of the year, it was determined I would be getting a refund. Well, that was a pleasant surprise. I was able to split up that money I had saved and divided it between two new accounts after I elected to be taxed as an S-Corp the following year.
5. Opportunity Fund Envelope: Otherwise known as the Emergency Fund Envelope. Whatever you want to call it this is where you transfer money that is not immediately required for daily operations. It is smart to save and grow your business. I am saving to pivot my pool care business into other revenue streams. The opportunity fund can be used for early buy discounts from your chemical supplier or to purchase another vehicle. Whatever you decide to do with this money it is important to consult with your accountant before making any large purchase.
5 Savings Account for a single Member LLC taxed as an S-Corp
1. Payroll Account: This was your owners draw account. Now that I am taxed as an S-Corp I am getting a regular payroll check direct deposited into my personal checking account with taxes already removed just like any regular W2 employee. I no longer need a tax account because that money is already being paid out of every payroll check. Working with my accountant we determined the right amount I needed to save in my payroll envelope to cover both my paycheck and the federal taxes. I am currently transferring 50% of my revenue to my Payroll Account.
2. Profit Envelope: This account remains the same however I have increased the percentage to 5% of revenue.
3. Sales Tax: This account remains the same.
4. Opportunity Fund: This account remains the same.
5. NEW… Business Credit Card Account: Having a dedicated business credit card account can help you manage business expenses effectively and build your business credit history. It provides a convenient way to track and separate business expenses, simplifying bookkeeping and expense reconciliation. It can also benefit you in the way of rewards. I decided to go with the Southwest Travel Rewards Card. We travel back home for Christmas and New Years. This card helps us pay for airfare, hotels or rental cars. Click the link below for a special offer from Southwest when you apply and open a new Southwest personal or business card. I put all of my business expenses on my Southwest Travel Rewards Card. Fuel, Chemicals, Supplies, Job Materials… As soon as I make a purchase, I enter the expense into my QuickBooks then transfer the amount from my main QuickBooks Checking account into my Business Credit Card Envelope.
QuickBooks keeps your financials organized, providing one place where you can easily manage your business and get real-time insights on how your business is doing. Whether your business is just starting out and you need to send your first invoice or you’re an established business and are looking for more insights to grow, QuickBooks has the tools to support your business growth. QuickBooks Checking with Envelopes is extremely easy to open, setup and use. Transferring money between accounts just takes seconds. Here is a list of benefits of opening a QuickBooks Checking Account…
If you need help setting up QuickBooks, customizing your chart of accounts, or opening up your new QuickBooks Checking Account please consider reaching out to me. I would be happy to answer any questions you may have or consult with you regularly as you get your new business up and running. Post your comments and questions below.
Remember, the necessity of these accounts depends on the nature of your business and its specific requirements. It is always a good idea to consult with a financial advisor or accountant to determine the most suitable banking setup for your pool care business.
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