Within your business, do you find yourself running around “wearing several different hats?”
Is your business family owned and family operated?
We find a lot of small business owners answering “yes” to these questions. Entrepreneurs have a lot of drive to start a business and then begin doing what’s needed to grow the business. They learn many different aspects of the company and become great at self-educating themselves. They make things work and look for ways to improve. And good thing they do because much of this great country is built on small businesses.
One great thing about entrepreneurs and small businesses is they can structure and live their lives around their businesses. They can work from home. They get to set their hours. They can have their kids work with them and help out. And the list doesn’t stop there. There are other ways small business is linked to the business owner’s life. However, even though there are significant aspects of a family business being co-mingled with family and personal life, there are crucial areas that need to be separated.
It’s important for liability and tracking purposes that a business owner separates their personal financial activities from their business activities. It can be easy to get a business card from a bank and then run personal transactions, whether that be grocery purchases or a liability expense, due to the ease of keeping things on one card. This becomes a problem from a liability standpoint if your taxes aren’t reported appropriately, and you get audited.
From an analysis and reporting standpoint, if things aren’t separated, you may be misunderstanding your performance. You may be experiencing low profitability and might start to look at what within your business needs to change to improve. However, if your personal and business finances are mixed, a personal item might be flowing in and affecting your bottom line. Your business might be performing better than what you initially thought, and it may be your personal finances that need to be addressed.
Other reasons for keeping your business and personal finances separated is wise for business owners. As your business grows and expands, having your finances organized will be critical to accelerating your success.