Business Money, Personal Money – Keep Them Apart!

You are a business owner, and your business is your only source of income.

It is not surprising if you have only one bank account and manage all your expenses from that account – be it business or personal. Of course, it is easier to do it this way – after all you spend most of your time in your business.
The problem is you are forgetting that your needs is quite different from your business needs and should be managed differently.

Let me put it this way – if you want your business to grow, it needs to be treated by you as a separate entity!

Firstly, maintain two separate bank accounts for your business and your personal cash flows. Make it easier for yourself to track business transactions.

This will then prompt you to transfer a money to yourself every month – arrive at a fixed amount on a fixed date, as if paying yourself a salary. This could take you a couple of years to arrive at.

Moving ahead, maintain separate budgets for each and record expenses in separate excel sheets. When you do so you identify the different costs associated in running a business - not all expenses you spend on yourself are business expenses. Let us not forget the income tax benefits you receive when you list and claim fixed expenses.

Finally Emergency fund – your business needs to be protected from risks you are not exposed to. While you need 3-4 months of fixed costs into your business cash reserve, you need to have accumulated at least 3-4 months of your monthly income into personal emergency fund. Create individual resilience plans.

The first step to financial clarity is hygiene.

I am sure you will agree with me when I say - Your business has a its own vision, mission, and goal posts unique to yours. The milestones are unique as well. Let the same idea reflect onto money management and witness everything clicking.

Introduce money hygiene to thus enable yourself to take timely decisions for business growth.

Keen to improve your understanding of managing cash flows? Book a call with me
 
Written by
Mrudula Muralidharan
Founder and Finance Coach
Million Goals