Do not spend from your capital: 3 ways to separate your personal and business finances!

2개월 전

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introduction

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.

Conclusion

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.

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These are really three great and imp tips that can help entrepreneurs separate their business fund from their personal fund.

I actually do fall into the habit of spending from my business fund using it to replace my personal fund with the hope and intention of putting it back after use. Is this really a good idea?

Thanks for sharing this great post with love from @hardaeborla and I hope you have a great day ahead ❤️💕❤️💕❤️💕❤️💕❤️

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Thanks @hardaeborla. It's never a good idea to always spend from your business. It requires proper discipline to separate the 2 finances. But that is the wisest thing to do. If you start now when your business is still small, it won't be a big deal when it grows.

I love the points you raised, the reason why entrepreneurs keep putting their hands into business funds is they always feel their business is too small for them to pay themselves.

The best thing for every entrepreneur to is to pay themselves that is the way to avoid eating from the business.

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@ben-edom. You made the point. We need to pay ourselves. At the very least, I can design my salary to match with the financial strength of the business. But that structure for self payment must be there.

@focusnow i truly agree with you, savings are for for future situation we cannot predict the future what it will be therefore we have to keep a small amount for the same.

This is one mistake that unskilled entrepreneurs always encounter, spending from a business capital often sends the business to ground zero. The 3 ways you mentioned in this post are what entrepreneurs should put into consideration before touching the business money.