For a lot of small business owners, the money coming in can look decent enough right up until somebody asks one very basic question, which is, “But how much of that is actually yours?” So, when you’re trying to improve small business finance, and right on top of that, trying to improve your personal finance too, you’ll have to actually think about this. Which sounds weird, because shouldn’t this be super obvious, though?
But yeah, honestly, this is usually where things start getting a bit awkward. Why? Well, because turnover sounds nice, paid invoices sound nice, a busy month sounds nice, but none of that automatically tells anyone what they’re really taking home once the business has taken its share first. Which, yes, that’s true, especially if you haven’t actually realized that yet.
And sure, it’s confusing; that’s really understandable here too. It doesn’t really have anything to do with being bad with money, being bad with business, nothing like that. It’s not even about being careless, either. Money moves around super fast in business, so it can sometimes just blur.
No, Busy Doesn’t Automatically Mean Profitable
It messes with your head because there’s that “time is money” mindset. And while a business can feel busy, look busy, and even sound successful to everyone else, the person running it still hasn’t got a clear clue what they’re actually making. Usually, if they’re doing it solo. But again, like what was just mentioned, money goes in and out super fast. You’ve got supplies, subscriptions, shipping, software, contractors, fuel, packaging, fees, tax, all those little bits keep nibbling away until the nice big number stops looking quite so impressive.
Just keep in mind, though, that being booked up and being well paid aren’t always the same thing. Neither is making sales nor making money. Plenty of business owners are working flat out while still not feeling fully clear on what’s theirs to actually spend, save, or rely on. Which, yes, that’s really sad to think.
Mixed Money Makes Everything Look Pretty Murky
When business and personal spending live too close together, everything gets harder to read. In some cases, it can make sense, like if this is your side hustle you do on the weekend, for example. If you’re literally the only person in this business, and maybe your spouse helps you from time to time. So that totally makes sense why money could get mixed up.
And small things in life happen too, that help in creating these little mistakes, like a lunch gets mixed in with a work expense. A personal subscription comes out of the business side by mistake. Something that should’ve been paid from one pot gets paid from the other because it was quicker at the time. No more examples because you probably get the picture. But it does get to the point where this is all a fairly big deal, though. So you need to separate it, yes, even a side hustle, that money needs to be separated.
It’s really not that much work either; it’s more about making a habit, and you can easily start that off by first just getting a limited company bank account, which alone makes business money stay in its own lane rather than get sloshed around with your personal spending. Some people will have a business credit card to also just try to avoid mixing up spending too.
The Whole “I Think I’m Doing Fine” Doesn’t Work
Yes! Yes! Yes! Now, when it comes to this one at least, it’s so painfully common. Because a lot of business owners operate on a general feeling rather than actual numbers. If there’s money in the account, things must be okay. If invoices got paid this month, things must be okay. Right? But no, this is a pretty big problem here because all it takes is just one slow month, one tax bill, one bigger expense than expected, and that basically will blow everything over eventually.
