It can be tempting to use money in your business bank account to pay your personal expenses. An optometry practice needs to implement stringent financial management practices to grow and flourish. Obtaining the services of a tax accountant who specializes in optometry accounting is important to help your practice’s profits go further.

Setting Your Salary or Compensation

How to set your salary will depend on several internal business factors and goals, in addition to the current economic climate, your location, your industry or niche market, your profitability, and what you think you should earn.

Taking too much can deplete the business coffers and leave you with cash flow problems, and a lack of finances should growth opportunities or emergencies arise. Taking too little, especially in a new business that is not yet profitable, will leave you feeling undervalued, emotionally stressed, and unproductive, and will most certainly impact your ability to make effective business decisions.

Business plan

Start with a well-thought-out business plan. Understand what your goals are and what your potential for growing the business is. Set a budget, examine your fixed costs and variable expenses, and revisit your plan semi-annually to make sure you are still on track.

Salary

Pay yourself a salary, the same as your other employees, from your business payroll software. Make sure your taxes and other deductions are accounted for. Regular compensation looks better to the tax office, and random large withdrawals may prompt an audit.

Keep yourself and your employees comfortable but still hungry to grow the business, by using bonus structures, and calculate bonuses on the percentage of growth. It is a great way to incentivize yourself.

Letting your tax agent calculate how much you should be earning after all your expenses and incidentals are paid for is another option. Your accountant can run what-if scenarios and help you plan your salary for the ups and downs of a business.

Additional compensation

You may set bonus structures, based on productivity and profitability, that will allow you to splurge on a vacation or buying something special for your family.

Keep separate bank accounts

Do not use your business account as a personal bank account as it will tempt you to run the practice on ‘bank balance accounting,’ which is based on taking whatever is left in the business bank account and can lead to serious financial problems.

Outsource your accounting

Outsourcing your accounting is by far the best investment you can make in your business’future. It reduces the cost of a full-time accountant and its concomitant obligatory payments to simply paying for a qualified, experienced tax accountant for optometry bookkeeping that can guide your business with sound financial advice.

Outsourced accounting services brings multiple benefits to your business, namely experience, investment advice, ensuring that local, state and federal accounting and tax regulations are met, an extra pair of eyes to prevent fraud and a non-shareholding partner that is invested in the financial health of your business as it benefits their business.

Consider your exit strategy

If you aim to grow the practice fast with the plan to sell, minimize your salary. Alternately, if you are settling down into a long-term business, indulge a little. Make sure you are investing in a generous retirement plan, no matter which path you choose.

Consider your practice payment model and incentives

Some practices pay a fixed monthly salary or hourly rate for office staff, and a base salary with productivity and profitability shares for income-generating staff such as other optometrists, while others pay everyone a salary. Think carefully about how you will incentivize in your staff, and ultimately yourself.

Contact Caro and Associates today to get the financial help you need to grow your optometry business via our email or by phone at (206)-497-0671.