For most small entrepreneurs, separating their personal finances from company accounts is a real challenge. It is common for all the money to get mixed up and the expenses and earnings are not well defined.
In order to prevent this kind of disorganization from affecting your finances, detailed planning for your personal and company earnings and expenses is essential.
Learn to follow the step by step to separate the accounting of your personal life from your company and do not run the risk of getting lost in the calculations and end up going wrong.
Step 1 – Make a financial control
Make a detailed survey of all the money that is moved by your company, calculate everything that comes in and everything that goes out and then set the value of your monthly profit.
Determine the company’s fixed costs
Keep track of all your company’s expenses, don’t forget that this amount is fixed and that you won’t be able to count on it for your personal accounts.
If possible, determine a value to invest in the growth of your company, always keep in mind the need to increase your business.
Calculate your company’s profits
After determining your company’s fixed expenses, find out the total profit it generates per month, that amount will be your salary.
Knowing this value, and respecting it, is very important so that you do not compromise the good functioning of your business, because if you exceed the value of your profit with your personal expenses you run the risk of embezzling the finances of your company.
Step 2 – Create separate accounts
To organize your personal and company expenses well, the idea is that you have separate bank accounts for each of the parties.
If you use the same bank account for the expenses of your company and your personal expenses the organization will be more complicated and the chances of you getting lost in the calculations are very great.
Step 3 – Pay your salary
The best way to define well how much of the money generated by your company can be spent on your personal expenses is to pay a salary for yourself.
This way you will know exactly how much money you have available and, thus, it reduces the chances of programming badly and ends up needing to interfere in the company’s money to cover your personal expenses.
Step 4 – Organize personal finances
Not bursting your personal budget should be your main goal. To achieve this the ideal is to organize your expenses in a realistic way and not live a standard of living above what you can afford.
Fixed expenses
The fixed monthly expenses are those that you have with housing, consumption accounts and food, they should not exceed 50% of your total budget, this is a great technique to avoid that in a month that your profit is lower you end up in debt.
Categorize as fixed expenses all that you can not cut from your expenses, ie, the basic items for your survival.
Lifestyle expenses
Part of the rest of your money available per month should be spent on your lifestyle expenses, i.e. buying clothes, paying for dinner in a new restaurant or going to a show, for example.
This category also includes spending on education, remember that investing in your studies is one of the best ways to grow professionally, so think about the possibility of taking courses related to your area of expertise or even language classes.
Investments
For an entrepreneur to invest in his own company is essential, whenever possible apply more capital aiming at the growth of his business, but not limited to him, it is important to have investments in other areas.
Thinking about the future is something to do from an early age, so be sure to set aside a portion of your earnings to make a private pension, ensure that your years of rest will be quiet.
Following this step by step, you will never have problems to get lost in your finances, put them in practice and ensure that all your expenses are well planned.
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