Handling Personal Expenses While Running a Startup
Most importantly, identify your business and yourself as separate entities.
As a startup entrepreneur, one of the challenges you might face is separating your business expenses from your personal expenses. This can be crippling some times. However, smartly handling personal expenses while running a startup business is crucial. For most people, they send money into the same account, whether it’s business or personal. Also, both business and personal expenses leave from that account.
Running your business like this can spell doom. You must first learn to separate your business from yourself as individual entities. Simply put, you should consider yourself as an employee to your business. But more like a more dedicated employee than every other employee.
Some of the best approaches to handling personal expenses while running a startup are described below. I strongly suggest that you take the state of your finance and your business finance personally because it is the lifeblood of both entities.
Manage your cash flow
Both you and your business have separate cash flows. What I mean here is that, just as your business is receiving and spending money, so are you. Putting both flows inside the same book can be confusing. Keep separate records to make sure that each cash flow is managed independently.
When your business makes a sale, record it. If there is a return, record it. When you need to meet with a customer, and you have to use the Uber, record it as a business expense. When you want to visit a friend for some coffee, or you want to take your girlfriend out for dinner, record it as a part of your personal cash flow.
By doing this, you can quickly tell how every cent comes in and goes out. That way, over time, you will be able to track where your resources are going into. While you analyze your records, you will be able to tell what you should stop spending on personally and in your business. Also, you will be able to determine where to up your game and where you should withdraw focus from.
You’re an employee too. Pay yourself
If you are handling your personal expenses while running a startup business, you may be tempted to keep records of cash flow while all the fund comes from the same account. Avoid doing this. Your business is a business, and you are a human being that works in (and for) the business. That makes you an employee. And employees receive salaries. Pay yourself a salary that is comfortable to keep your business going. When you want to make personal expenses, make sure that the money comes from your personal bank account (i.e., from your salary). When the salary finishes, your income runs out until you receive the next salary.
Your bills are yours. The business bills are its.
Handling personal expenses while running a startup might get clumsy. Because we are humans and we hate bills, we may want our business to take care of our bills-electricity bills, water, internet, phone, and so on.
Don’t do it, please.
If your business is still a startup, resist the urge of using utilities that you usually won’t use while living on a salary below minimum wage. You need to keep all the money you can keep inside the business for sustenance and growth. Fix your bills by yourself from the salary that you receive from your employer (your business).
How to Spend Money as a Startup Business
A simple way to avoid overspending and take your business to new heights.
Being a startup entrepreneur is one of the toughest parts of entrepreneurship. You are forced to live two lives. Your family needs you, your normal life needs you, but most of all, your business needs you. There are lots of trade-offs, and we can often ignore the fact that our business and personal expense are running from the same account.
Slow down, take a moment to separate those accounts. If your business is receiving money through your personal account, you must consider opening a bank account for your business. All transactions have to go through the business account. And when it’s time for salaries, your personal account gets paid from the business a specific amount (your salary). That’s the best way to stay afloat. And it needs discipline, dear entrepreneur.
Originally published at https://noknom.com on July 6, 2020.