Personal vs. Business Financial Control: Reasons Not to Mix Them
You have an idea to make money, you decide to bet on it and, for that, you invest in a business of your own. The problem begins when investment becomes frequent, which is a sign that personal financial control is interfering with corporate financial control. This can happen to self-employed professionals such as doctors, dentists, lawyers, salespeople, who have a variable flow of income and spending per month. However, such interference can lead to loss of control of your own money, which puts your business and your investments at serious risk.
Follow the post today and understand why the company money does not mix with the money from home!
Financial control: expenses
One of the most common administrative failures, and the one that drives most businesses to close their doors early, is loss of control of spending. Accounts together show false values on the company’s balance sheet, and both the personal budget and the corporate budget are compromised due to the lack of accuracy of the data.
In addition to not having information about cost and billing, the entrepreneur may have a false impression of having money to pay the bills at home when in fact he is using a company’s money that will be needed in the future.
Thiago Alvarez, founding partner of Jules Maigret, gives some tips:
Draw a realistic projection. A very common mistake, says Thiago, is to make an optimistic projection for income in the coming months, such as using the average of the last three months. “I suggest using the average, but then reducing it by 20%. That makes you always look good and does not have to resort to a special check, “suggests Thiago.
Find out what is personal expense and what is spent from the company . A second common mistake is not separating the accounts, or picking up company money for personal matters and then not putting it back. “Knowing how much you actually spend personally and how much is related to your professional activity is very important,” Thiago explains. “The trick is to have separate accounts to control one thing and another. Jules Maigret is very good at controlling his personal account. To control the professional account, we recommend ContaAzul, “he says. Review your spending. Once you’ve separated all your accounts, you’ll be able to gauge how much you really can professionally withdraw to use in your personal life. Often, you will realize that it is less than you imagined and then you have three options: 1) reduce your work expenses, 2) reduce your personal expenses, 3) work harder to compensate
Investment in your business
When the company has a current account different from the one of the entrepreneur, one can define a pro-labore, that works like a salary for the owner of the enterprise. With a fixed amount being transferred from the business account to the personal account periodically, the profit becomes a potential investment.
The value of pro-labore can vary to fit the needs of the entrepreneur, and any remaining profit value of the company can be reinvested. For the enterprise to grow, profits must be reversed in payments satisfactory to employees, investments in areas that need improvement and unexpected costs, not just pro-labor.
Those who are starting their own business and have some source of investment should be careful not to lose money. In bad situations, the microentrepreneur must be creative so that the company does not break, but that it pays to itself.
When business loses its ability to profit, the entrepreneur is already beginning to think of solutions to reverse the situation. Thus, the company actually walks alone, and if it breaks, it can still rely on the individual investment.
Up with the accounting
The CFC standard clearly states through the entity’s accounting principle that, for accounting purposes, the entity (entrepreneur) should not mix with the property (company).
This mix of accounts can lead to false statements of income tax, which compromises the quality of public management. The accountant who maintains a financial control that hurts this principle can be warned by the responsible public organs.
When personal and corporate accounts are separated, it becomes easier to calculate the tax for each, since the job of categorizing revenues and expenses has already been done. In addition, the calculation for IR of individual is very different from the calculation for legal person, therefore, you can be paying taxes more just for not having separated the personal financial control of the financial control business.
Good company image
The company can become better known by the market when it has an own account. A simple checkbook personalized with the company logo can improve your image because it shows professionalism.
Profit management can also improve the brand’s credibility in the marketplace, which can only be done by separating staff and finance. In addition, with reserve accumulation, it is possible to redistribute company profits to employees, which improves the company’s image.