Personal Finance vs Business Finance.
Most people consider themselves good at managing their finances. But when it comes to handling their businesses’ finances, many fall flat. This mismatch often leads to conflicts between personal and professional life, as well as less understanding throughout the company regarding where money should go and what it should accomplish. Here are some tips to help you manage both types of finances simultaneously.
Start with a plan.
The first step is to form an actionable plan of how you want your business to operate financially. What do you need to spend? (Savings rate?) And what will you earn? (Earnings per hour or week?). Then create goals for each year, quarter or month that reflect those numbers.
Separate what’s yours from what belongs to your business.
It may seem obvious, but if you have a partner or employees in your business, make sure they know which financial information is theirs versus yours. In other words, don’t mix personal and business expenses on your credit cards and bills, and be careful about discussing your business income and expenses with outsiders outside of your legal team.
One way to ensure your accounting system reflects all of your finances accurately is to avoid hiding anything from yourself or others. If you’re not going to show up to work every day with clear eyes, then there’s no reason why anyone else should either.
Know your options.
The key to successful financial management is having access to tools and resources. If you think you can save an extra $5,000 by doing things manually instead of using software, then do so. There are plenty of free online banking apps and calculators out there that will allow you to track your spending and keep an eye on your savings goals.
Keep it simple.
Be sure to understand the basics of bookkeeping and accounting before diving into more complicated systems. It will take time to learn everything, but sticking with it will be worth the effort in the end. You might also find it helps to talk to someone who has experience keeping books for a small business. They can offer insight on whether you’re taking this process seriously enough and give you advice on where to focus next.
In conclusion, managing your personal and business finances together isn’t easy, but it doesn’t have to be difficult. Just try to use these five tips to get started.