For those of you who are just starting a business, mixing personal and business finance is a fundamental mistake that is often made. Usually, this happens because of the messy cash flow recording and sudden financial needs. As a result, business finance is often used for personal matters. In fact, mixing business finance with personal matters has many risks.
Risk of mixing personal and business finance
If you are not disciplined in separating personal money and business money, you will be distracted yourself when making company financial statements. The risk of recording business cash flows is greater. This can have a pretty bad effect if you miscalculate the business tax you have to pay. Of course, you don’t want this, right?
The importance of separating personal and business funds
Separating personal money from business money is very important. It’s best to apply this since the first day you open a business. After knowing the risk, the next thing you have to do is apply it in the following ways:
1. Create a separate account
The most practical thing you can do is to have a special account for your business. That way, you won’t need to put business money into your personal account. No need to make it at a different bank. You can create these accounts at the same bank and continue to monitor the financial condition of your business and your personal financial condition.
2. Save proof of transaction
Whatever expenses for your business, make sure you keep all the evidence of the transaction. Never do personal transactions with businesses together. Always separate the execution of transactions and proof of the transaction. Also do a record of your expenses regularly.
3. Give a salary for yourself
Entrepreneurs often use business money because they feel they don’t have enough money. Especially if the business has made a profit, you usually feel entitled to enjoy these benefits personally. In fact, this is not a good application of financial management. To avoid this incident, you should allocate business funds to pay yourself. That way, the salary is what you can use to meet your personal needs. Don’t forget to also transfer your salary from a business account into a personal account.
Financial management is very important so that your business can run smoothly. One good management is to separate personal and business finance. Do not just because you need urgent funds and then use a loan of money from your business funds. It is better to borrow money by applying for an online loan from Captain Greg. That way, you don’t need to mix business money with your personal money.