Entrepreneurs: the 5 keys to separate personal expenses from business expenses

to be mixed with that of the business activity when starting a

business, since in general much more focus is placed on productive and commercial tasks than on financial issues, which are usually left for another time.

But this carelessness is what

Neither do planning, which in the long run will prevent further growth. 

The numbers are a reflection of different aspects of business activity.

They show how it is currently working, allow you to think about what could be adjusted and also

.

But it is essential, to have certainty, to

, separate from personal or family accounts, which could otherwise be put at risk.

One of the most common mistakes made by entrepreneurs is mixing business money with family or personal money.

Photo illustration Shutterstock.

What are the advantages of separating personal income and expenses from those of the business?

"When the time comes to manage the money of the venture, it can happen that it is very difficult to separate what is ours from what is of the business, because the business is ours, but we are not the business. On the contrary, the business is its own entity and independent", explained the entrepreneur and founder of Neolo and Pulsión Digital,

 to

.

However, he stressed that this division is necessary and described the benefits of separating our income and expenses from those of the business:

• It allows to have greater clarity about the performance of the business

  : because when making personal expenses with money from the business, it can be thought that the business is not giving enough profitability.

  But in reality it is giving it, only that we are spending money that previously we should have withdrawn in a personal capacity.

• .

  Greater clarity on costs: 

  fixed, semi-fixed, variable, direct, indirect.

  
  

• Provides more visibility of profitability

  on billing and sales.

  It allows us to compare ourselves with other businesses to see how ours is performing.

  
  

• It forces you to have more discipline

  over your own income and expenses.

• It allows assigning a cost to our work

  , based on what we contribute as owners.  

  
  

• At the

  legal and tax level,

  personal expenses are required to go in a separate lane from business expenses, and failure to do so can imply penalties.

Having personal expenses separated from those of the business provides more visibility on the profitability of the billing.

Photo Shutterstock.

The 5 keys to separate personal expenses from business expenses

Discipline and criteria

are the main skills to be able to make a logical separation and have a surplus of money in case the project does not work out and continue living without financial pressures.

These are 5 tips that will help you carry it out:

1. Have separate bank accounts

Separate income and expenses in a bank account.

use a

for your own salary, extra income and family expenses, for example and a different one and in another bank for income from sales and payments to buy merchandise, supplies, salaries, rents and other business expenses.

Although there will be a higher cost, since each bank will charge for the maintenance of its account and its cards, it will bring great benefits to order the accounts.

However, there are also digital banks or virtual wallets without any maintenance expense, which can be used in these cases.

2. Keep a record of income and expenses separately

The next step will be to order the numbers to get started.

will help to know the current state.

It can be done on your own or ask a trusted accountant for help so that they can guide you on how your income and expenses are.

As mentioned above, in the

, then the salary is collected and the household expenses are paid.

In the

, the money from the sales of the clients is received and services, merchandise and inputs are paid to the suppliers.

If we have to get

, we use the

;

if we need to do it

, we use the

.

In this way, the operations we carry out will be ordered and assigned correctly.

This will also force us to think about whether we put a certain expense or income in our business or our personal activity.

3. Define and assign yourself a salary 

At the beginning, entrepreneurs do most of the things in their new business and do not earn a salary, they get money as they need it for their family expenses, it does not matter if it is a lot or a little.

A key point to order the accounts of a business is

for working in the business.

It is not about the profit from having a business, but about the remuneration of personal work.

• Define a

  remuneration for personal work

  .  

  
  

• Compute that entrepreneurial salary as an

  income in personal accounts

  and an expense in the entrepreneurship accounts.  

  
  

• The

  entrepreneur's salary is part of the cost of the activity

  .

  It must be computed when defining the prices of the products or services that are sold.

• The

  own remuneration should be a reasonable value

  based on: what is paid in the market, the average salary of the activity that is carried out, what we should pay to another person to replace the entrepreneur and/or what the entrepreneur could earn in a similar activity.

It is important to define how much the entrepreneur will charge each month for his work.

Photo: Pexels.

4. Define the cost of using own goods 

Just as the entrepreneur's salary is computed as income in personal accounts and as expenses in business accounts, the

(rental of premises, automobiles) must be taken in the same way.

If it is, for example, an entrepreneur who uses

, or who uses his car to distribute the products he sells, in these cases, the rent that should be paid for using a similar place should be an income for your family and an expense (cost) for the business.

For the use of own vehicles, it would also be convenient to assign a percentage of amortization or rental.

5. Assign a percentage of use of shared services

This case is similar to the

, but it is not about goods that could be rented, but about services that are consumed.

This is, for example, the case of

natural

,

,

or the

.

In these situations, it is important to look at the

.

It has to be a

: an activity that requires ovens with a lot of gas consumption or machines with a lot of electricity consumption.

In the case of telecommunications, a part should be assigned to the business if it is necessary to pay a subscription or a much higher consumption than what the family had.

Each case must be seen separately.

LN

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