Aligning our real estate clients’ business accounts to enhance his personal financial strategy

Background

We have been working with this client for a few years. He has his own Real Estate business. To date, the focus of his plan has been on building his family’s wealth by paying down his mortgage and building up his asset base.

Recently we started focusing on his business finances to ensure they were set up in a way that would help support his personal plan. Up until this point he has been running his business finances from one account and holding his excess business funds in his offset account.

This has led to some confusion at tax time though as he was unsure what money in his offset account was his personal savings, what would be needed for tax & what is his profit from the business. This made things blurry financially and hard for the client to see what money from his business we could use for his personal financial strategy.

Strategy

Following a review of his business cash flow structure and income figures from the last two financial years, we set up the following business accounts with set percentages to be transferred into the accounts each month as income is paid.

  1. Operating expense account
    • Where all income will be paid into and all business expenses are paid from
  2. Tax account
    • Where he keeps funds for payroll tax, GST and income tax on profit
  3. Profit account
    • Where he keeps his business after-tax profit – which is the money we can use for his personal financial strategy

Outcomes of advice

  • We have a cash flow structure in place within the client’s business that allows for his operating expenses and future tax payments to be covered.
  • The money he builds up in his profit account is his to keep. This money can be transferred into his offset account, without him having to worry about this money needing to be put back into the business at a future date.
  • Our client feels confident about how his business is operating financially with this structure in place.
  • Our client can see the progress he is making financially within his personal plan from the funds he is pulling out of the business and investing personally.

Ryan Porter is a Wealth Coach at Catalyst Wealth Group. His mission is to help his clients achieve financial success and live their ideal life.

Any advice or information in this publication is of a general nature only and has not taken into account your personal circumstances, needs or objectives. Because of that, before acting on the advice, you should consider its appropriateness to you, having regard to your objectives, financial situation or needs.