Owner remuneration: what can your business afford to pay you?
Plan owner remuneration using an operating budget and cash forecast that include all commitments. Test the complete cost of the proposed payment and a downside scenario. The appropriate salary, director remuneration or dividend treatment should then be reviewed with your advisers.
You work hard and the business makes sales, yet your personal income remains unpredictable. Before seeking tax optimisation, establish whether the problem is contribution, fixed expenses, late collections or withdrawals that do not fit the operating cycle.
Separate three amounts
- Desired personal income: the amount, frequency and stability you want.
- Complete company cost: gross payment and applicable employment or social charges.
- Cash available on each payment date after operations, debt, taxes, investment and other commitments.
Annual profit does not mean the bank account can be emptied. A high balance may include customer deposits needed to deliver future orders. Check where the cash came from and which payments follow.
Model regular remuneration
Enter the proposed payment on its expected date in a forecast that already includes existing operations. Avoid counting costs twice if they are included in budgeted payroll. Check profit after remuneration and the lowest cash balance. The reserve depends on seasonality, commitments and uncertainty; a fixed number of months does not suit every business.
Fictional example: the bank balance is incomplete information
Entirely fictional example. A business starts the month with €70,000 of cash. It expects €45,000 of collections and €60,000 of payments, including current remuneration and all modelled commitments. The expected closing balance is €55,000. An increase costing an additional €4,000 paid this month reduces that to €51,000.
If €20,000 of collections move to next month, the balance falls to €31,000. Against a working reserve set at €35,000 for this example, the increase fails the downside test. The reserve is illustrative, not a universal recommendation. The forecast must also check dates within the month and later months.
Working hard for little income: identify the cause
Before cutting your income or selling more, review customer profitability, unbilled work, discounts and expenses that have become permanent. Extra revenue that consumes all its contribution in delivery time and costs may not fund higher remuneration.
Salary and dividends require coordinated decisions
Financial capacity alone does not establish that a distribution is permitted. Distribution rights, social charges and tax depend on the country, company form and the owner’s circumstances. Confirm these with your accountant or appropriately qualified adviser. This method assesses company capacity rather than recommending an individual tax arrangement.
Review the level throughout the year
For established SMEs and startups, a monthly review can compare planned remuneration, profit, collections and commitments. Ongoing support helps assess when to maintain, increase or defer a payment. Mercova connects that review to decisions alongside your existing advisers. See our fictional monthly report.
Frequently asked questions
Can I take all the profit?
Profit, cash and legally distributable amounts are different. Check all three before deciding.
What percentage of revenue can I take?
There is no universal percentage. Contribution, expenses, collection timing and commitments determine actual capacity.
Does the method apply in Switzerland?
Yes for forecasting logic, using the business’s currency and actual flows. Remuneration and distribution rules require local review.
A second set of eyes on your numbers.
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