Buckets Of Cash By Kym Krey

Hands up if you sometimes get a bill that you’re too scared to open! Maybe it’s your BAS statement or your tax bill; maybe your staff’s superannuation is due; it could be a stock bill, your car rego or even just your credit card statement.

You leave it unopened for days through fear or dread…. because you know you don’t have the money to pay it. And then, it either goes on another credit card or you spend the next few weeks scraping together the cash to clear it…. until the next bill arrives!

Know the feeling?

We’ve all been there, and many business owners spend their entire business life in exactly this pattern, lurching from bill to bill, debt to debt, trying desperately to get a decent night’s sleep along the way.

But it doesn’t need to be like this!

There’s a reason why this is happening to you and moving out of this pattern is a choice…. but we’ll need to put our ‘big people’ pants on to solve it.

When you’re operating in this manner, your finances are a blur. You don’t know whether the money you have sitting in your account is enough, if you can buy that new piece of equipment you need or if there’s another nasty surprise coming right around the corner.

Where you need to be, is having money tucked away in advance, just waiting for that bill to arrive. We know it’s coming. It shouldn’t be a surprise. We should be ready and waiting for it.

When your main senior goes on 3 week’s holiday and needs to be fully paid out in advance, or needs to take a week off on sick leave, wouldn’t it be amazing to just transfer that money back into your main account and make the payment, with no stress? Or when your BAS or superannuation is due, to simply move the money you’ve had sitting there waiting, back to your trading account and pay it in full? No anguish, no sleepless nights wondering where you’re going to get the money?

Ready to make that happen? It’s all about creating ‘buckets’ of cash!

Your ‘buckets’ are additional online accounts (usually fee free), that you’ve set up as holding accounts to store money that will need to be paid out in the future (Hello Barefoot Investor, anyone?).

It’s not your money, so you need to get it out of your main trading account so you’re not at risk of spending it and to allow you to see what is left- that’s your money!

You can set up as many online accounts as you need, all linked back to your main trading account and you can name them after their purpose, e.g. ‘Staff Entitlements’, ‘Car Expenses’, ‘Tax’, even ‘Refurbishment’, ‘Staff Education’ and ‘Dream Holiday’ etc.

Then we work out how much needs to go into each one weekly and set up an automatic transfer/direct debit, to move the $ from your main account, into each ‘bucket’ account without you even noticing. Important: This must be set up automatically. Don’t rely on your memory or wait and see how much is in your account to decide if you’ll transfer the $ that week. This is crucial to your success. You can even stagger the different transfers on different days of the week for easy cashflow. Tuesday is staff entitlements, Wednesday is stock costs, Thursday is Tax etc.

With small amounts coming out, you often don’t even miss it, but you have that lovely, comforting money quietly accumulating in each account until the magical day arrives when you need to pay it out. You look at that account balance and do a little happy dance because there is more than enough sitting in the account to cover it! Huzzaah!!

Want a piece of that action? Here’s what we’re going to do:

• Staff costs

Start by calculating what it actually costs you in total to employ each person (and that’s far more than just their gross wages).

- You’re going to work out what they cost per week in superannuation, holiday pay + loading, sick leave, even worker’s compensation, and add that to gross wages to find their total employment costs.

- THAT’S what you set their targets on, THAT’S what your pricing needs to easily cover and THAT’S what you need to move out of your business account each week for every staff member into your ‘bucket’ account. Remember: It’s not your money!

- So, it’s weekly total employment costs (not just gross wages), less their net wages (the amount that goes into their bank account after tax), then move the rest into your separate online staff ‘bucket’ account.

- If you’d like a simple worksheet to show you exactly how to do this, shoot me an email to kym@kymkrey.com.au or send me a DM

• Stock bills

How much do you usually spend in stock purchases each month across all companies and wholesalers? Divide that by 4.3 (average number of weeks per month) and that’s how much you’ll set up your weekly transfer for into your stock ‘bucket’ account.

- You can even set up a weekly Bpay to most product suppliers to actually pay your account off weekly and avoid the big bill at end of month when you’re desperate to order again but are struggling to find the cash to pay the bill.

• GST:

Divide last week’s turnover by 11 and that’s what goes into your tax saving ‘bucket’ account.

• Staff education

Want to take your entire team to Hair Festival or bring quality educators into your business several times each year? No problem. Work out how much it will cost in total, divide by the number of weeks until the event, and set up your weekly debit for that amount into your staff education account.

• Upgrades

Will you need to renovate in the next few years or move premises because you’ve outgrown your current space? A new shopfit can be a significant expense, but it may be necessary to protect the value of your business and the positioning of your brand, or even just to allow you to keep growing. Create the plans, get the quotes, add them up to find the total estimated amount you’ll need and either:

i. Divide that amount by the number of weeks you have until you’ll need that money, or, if there’s no specific date or deadline (like the end of your current lease)…

ii. Decide how much you can afford to allocate each week, and that will tell you how long it will be until you can afford to press the GO button on the project. Yes, financing a big project with a business loan may be an option for some, but if getting finance isn’t an option for you, this is your workaround.

Once you’ve got these basics in place, we can really start to have some fun! Using exactly the same method, I’ve had clients saving for their own regular holidays (including their rent/ mortgage payments while away + their own wage + spending money), home renovations and even an investment property! My favourite client story? A lovely Cairns salon owner who called me with $6,000 in the bank and over $30,000 in bills in front of her. Her turnover was very impressive but…. still no money in the bank. Fast-forward a few years and by applying exactly what I’ve explained here, she was not only out of debt, but she’d also bought her first house and…. purchased the freehold to her building! BOOM!

This method will set you up with good money habits to get you out of debt and overwhelm, but once you’ve got the hang of it, we can start gently ‘tweaking’ the amounts you transfer by even $20 then $40 per week, and before you know it, you have that delicious ‘buffer’ account with a lovely stash of cash to fall back on if you ever need.

Wouldn’t that have been nice to have when Covid knocked us sideways?

Believe me, getting your finances under control and having a ‘safety stash’ behind you can make a huge difference to how well you’ll sleep at night!

Let’s get your ‘buckets’ in order……

Kym Krey is a specialist salon industry business mentor with the runs on the board to help you get real results. Whether it’s getting your money under control, preparing for that big expansion or learning how to manage your team for peak performance, she’s the expert you need on your side. Get in touch at kym@kymkrey.com.au or DM on socials

When your main senior goes on 3 week’s holiday and needs to be fully paid out in advance, or