One of the biggest headache entrepreneurs always struggle with is how to separate personal finances from the business finance. These two almost always cross paths and its really a dangerous combination that can undermine any business. Personally, this has been a long-standing challenge in which strong discipline is needed for me to have significant wins, but the battle is far from over. I believe others too have this struggle. So how do you make and keep separate records for your personal expenses and business spendings? Maybe these 3 practical tips can be of assistance.
1. Run a business account: For some years, I had one purse. So all the money both personal and business went to the same bank account. So if i need airtime or want to buy a new watch, I spend from there. If I also need to make business expenses, I dip hands into the same pocket. How wrong I was. So if you are an entrepreneur and you still run your business from your personal savings account, you are wrong. You need a business account so that it will be easy to keep track of business spendings. Running spendings for business and personal needs from the same account will stagnate your business and prevent you from keeping records properly. Additionally, you will find it hard to know if you have started spending from business capital, and this is the biggest risk. So separating the 2 accounts is the first step towards solving the problem. But there is more!
2. Have a renumeration: If were an employee, you will be paid. The same is true for an entrepreneur. you are working - but for yourself. So you have to pay yourself. Try to determine how much is your wages and pay yourself at the end of the stipulated period. The advantage of paying yourself is that you need to make personal spendings. It is true that you run a business account and a personal account. But if you do not have funds in your personal account, you will be tempted to solve personal problems from your business account. After all, you own the two, so it will seem as though nothing happened. But that is absolutely wrong. When you pay yourself, you will always have funds in your personal account to solve financial problems for yourself. How about receipts from purchases?
3. Have folders for your receipts: Just as you wouldnt spend from your personal account on your business, it is equally important to keep receipts for each spendings separate. You want to have a place where your receipts for personal expences are kept. The same applies for your business. So if you wnet shopping for personal supplies and there you saw an office equipment you will need, please, have them enter the purchases on two receipts. If you have one receipt for the whole purchase, you might find it difficult to keep records. This will also mean combining personal and business spending. But when you have two different receipts and different places where you keep them, it will make for proper record-keeping for your business.
It is always a difficult thing to keep business funds separate from personal spendings. But with a proper and disciplined approach, you can do it. The biggest motivation is that you do not want your business to suffer financial crisis which could easily happen when you spend from the same pocket. The above suggestions and other tips from your research will actually help you to keep each of personal and business finance where they belong.