Have you heard of the expression “Don’t put all your eggs all in one basket” ? Well, now you have. That’s when you make the mistake of treating the business as your own. And yes, I wrote ‘mistake’ on purpose. Don’t fall into the trap of mixing what is personally yours and what the business finances are into the same basket.
You need to distinguish between the two. You and the business are different and separate entities. Yes, you may be the 100% shareholder of the business but that doesn’t mean that you should treat it as part of the family. You should be looking at your business as an investment, and with all investments you should expect a return. Returns should be cashed in and then you decide whether it would be better off somewhere else (diversifying) or worth putting back into the business.
If you lend the business money, make a record of it so the business can pay you back. And if you spend on behalf of the business, keep the receipts so you can claim the business expenses back, so that you’re not out of pocket at the end of the day.
So remember, your business finances is an egg not the basket. It may be a big, fat, juicy, golden egg but it’s not the whole basket.
- Make sure that you aren’t funding the business using your own money without a record of it being a ‘loan’, be that a business loan or actually an expense which you then claim back
- Use petty cash and keep receipts so that you can be paid back for business expenses
- Start drawing a salary / dividend from the business (pay yourself first)