Business Owners: How to Manage Personal and Business Finances Effectively

Photo by Kelly Sikkema

Small business owners are hard-working, imaginative, resilient, and combative individuals who put their talents at the economy’s service. A highly complicated aspect of entrepreneurship is to separate personal and business aspects, especially if we consider the importance of the family in the success of any company, regardless of the niche in which the project is developed.

Although not all aspects can separate because one will always depend on the other at the end of the day. But one of the best practices for the success of any business is to keep the owner’s finances separate from those of the company. This task can be a double effort, especially at the beginning, when the business is reaching profitability.

However, doing so from day one will save you time and trouble for the development of the company and will also allow you to enhance your business finances.

The first step to make this transition is to open separate bank accounts for personal capital, another one for the company’s resources. In case you have obtained some financing such as ITIN loans or commercial loans, a good practice is to manage it in another account so as not to confuse resources.

How to split or separate business finances from yours

Some actions will facilitate the financial separation process. Implementing them will bring great benefits in the short and medium-term that, in the future, will allow you to reduce the pressure, hire your successor at the head of the business, and even expand your business in a more orderly manner.

1-. Get an EIN or ITIN

Getting an employer identification number (EIN) will bring you closer to financial products from banking institutions, such as grants and loans. In case your immigration status is not finalized, you should apply for an Individual Taxpayer Identification Number (ITIN), designed to pay taxes without the need for a Social Security Number. This will open the doors to open bank accounts and apply for financing.

2-. Set a fixed salary for yourself

A common practice of entrepreneurs operating their businesses is to not set a salary for themselves. This mistake will cause them to take money from the company’s bank account for their expenses. Setting a salary for yourself and transferring it to your account each month will be no confusion. You will not harm your business.

3-. Apply for personal and business credit cards

Both financial products will contribute to better management of your finances. Remember that credit cards are helpful to obtain benefits such as interest-free monthly payments, promotions, and discounts. Still, their purpose should not be to postpone payments. Always pay the total amounts so you will avoid accumulating interest.

4-. Use e-wallet

This digital tool will allow you to make payments and transfers between your bank accounts, credit cards, and payment systems such as PayPal. This way, there will be no excuse to keep your business and personal finances separate.

Organizing business finance to optimize cash flow

These four easy steps will help you better organize your financial resources. Establish adequate accounting processes at both personal and business levels. You will soon have your balances, debts, and resources under control to meet your company’s commercial and operational obligations.

Having healthy finances is the vaccine that all entrepreneurs need to grow their projects. Among the benefits of trying in this area is the possibility of accessing financing products, such as ITIN loans, Inventory loans, and small business loans without suffering from the requirements.

How to develop healthy finance habits

Generating good habits to have healthy finances is easy if you follow the tips we share above. A good practice for controlling your financial resources, and those of your company, is to use a money management app. With this tool, you can register your incomes and expenses from anywhere. Although if technology is not your area, start with a notebook or ledger.

Pieces of advice that will help business owners to improve their finances

Making financial control a priority assignment in your business and personal life will help you reduce stress and worry about money. And believe it or not, you’ll be able to spend with more confidence. One of the main reasons why companies fail, according to information from CBInsights, is running out of money, avoiding this situation by improving your financial management and achieving all your personal and business goals.

By improving your company’s financial management, you will know when to tighten your belt, invest or obtain capital through financial products such as ITIN loans or commercial loans. Financial education is essential to achieve business success; read articles about it, take financial training courses, or hire experts to advise you.

 

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About the Author: Brian Novak