A greater percentage of people hardly find the thin line between their business finance and personal finance. So many people think their businesses finance is the same thing with their personal finance, but that is not true.
It is however necessary to educate oneself and bear in mind that you and your business are different persons. Even if you have more than one business, it is wise that you treat each of the finances separately from the other and also separate them from your personal finance too.
For many people, as far as they are concerned the principle of “I own the business and the money” applies in their financial dealings. So they fail to separate their business finance from their personal finance.
This mumbo-jumbo of finances can make a mess of both your business and personal finance. Applying this system of financial accounting, it will be nearly impossible to assess the progress of your business and your personal financial health.
When you deep your hands into your business purse for personal expenses with the assumption that it’s still your business and there is no harm whether you pay back or not ,it will bring down your business.
Equally grave is failing to pay yourself because you own the business as this will leave your personal finance dry.
Running your business from your personal finance may also give you the reason not to be accountable for the income of the business or committed to paying back to your personal purse too.
To avoid these conflicts, it is necessary to tidy up these finances, sort out your personal and business accounts.
Create a balance sheet for both your business and personal finance so that you can ascertain how much you make from your business, how it is used to carry out business expenditure and also a balance sheet for your personal income indicating how much comes into your personal purse and how you spend it on your personal and family expenses.
Another mistake you must avoid is keeping one account for all your finance. You should maintain separate bank accounts from your business and personal finance, giving your business account a different name other than that of your personal account to avoid conflict of interest.