3 Reasons NOT to combine Personal and Business Expenses
This is a common practice by many small business owners. However, if your plans are eventually to expand and grow your business, this practice may have a BIG impact on those future plans.
Decreases the Value of Your Business The value of your business is based on many things. However, your profit margins and net profit are a big part of the valuation. When you combine your personal expenses with your business expenses, your profit margins and net profit appear lower.
Makes Managing Expenses Harder A big part of running a successful business is based on how well you manage your expenses. A big part of managing your expenses is completing a periodic review of actual expenses compared to your budget (expected expenses). When you mix the personal and business expenses, it is harder to analyze and make decisions about your business spending.
Makes it Harder to Obtain a Business Loan At some point, your business may need to obtain a bank loan. A bank will review your financial statements and tax returns to determine how much or whether or not to loan your business money. By combining your personal expenses with your business expenses, it will lower your net profit and make your business appear less profitable. Thus, making it harder to obtain a bank loan for your business.
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