You've certainly heard that mixing business and pleasure is a bad idea, but did you realise that mixing company and personal money may be just as bad? According to the Federal Reserve, 62 percent of businesses have utilised personal cash to solve financial problems in the previous year.
If your business is short on funds, delving into your personal account may seem like a sensible option, but it can backfire in a variety of ways. In addition to making it more difficult to track your cash flow, this approach might raise red flags with auditors, make you personally responsible if your company is sued, and eventually harm the value of your firm.
Here are some strategies to keep your company and personal finances separate:
Employer identification number
Instead of utilising your personal social security number for commercial purposes, apply for a company-specific number. Your Employer Identification Number can be utilised for a variety of commercial purposes, such as opening bank accounts, obtaining permits, and submitting taxes. Even if you simply want to work for yourself, it might be beneficial.
Establishing both your brand identification and a professional image requires a bank account devoted entirely to your firm. According to a Clutch poll, more than 80% of established small companies have their own bank account.
A business bank account may assist you in better managing your cash flow, tracking payments, centralising essential transactions, and staying within your budget. If you open your own company account, you may be eligible for a credit card, which you may use to pay for greater costs instead of using your personal cash.
You should be able to apply for a small business credit card once you've opened a company bank account. This card may be used to make commercial transactions while also helping to improve your company's credit score. Building credit over time is crucial since it can improve your future eligibility for SBA loans, bank loans, and lines of credit.
Regular paycheck for yourself
Pay yourself a monthly wage to help you draw clear lines between your work and personal money. This amount should be sufficient to meet your basic personal costs, and it may also be incorporated into your company's operational expenses and overall business strategy.
Crowdfunding campaigns allow you to be inventive.
Consider conducting a successful Gofundme campaign for your startup business instead of utilising personal cash. While Gofundme, a donation-based crowdfunding tool, is arguably the most well-known, you may also check into other options.
Constant communication with your lenders
It's critical to contact your lenders before your debt becomes unmanageable, whether you need to expand your line of credit, extend your monthly payment deadline, or decrease your interest rate.
Keep regular updates for business loans
To combine all of your obligations into one monthly payment, apply for a Small Business Administration loan. Having to pay one creditor at a reduced interest rate might help you save money while without hurting your credit score.