Juggling finances and expenses as a business owner can be a tricky task, especially if you’re doing your own bookkeeping. However, it’s important to handle this aspect of running your business carefully. Mismanaging finances and not taking the appropriate steps to protect yourself can put your own personal assets at risk. Here are a few tips to help you keep your personal finances safe while you’re running your own business.
Know The Risks
Every business in every industry comes with a certain degree of risk. For some, the risk comes from interaction with customers, while with others, the risks come from the operation of the business itself. Have a thorough understanding of where things can go wrong, and do what you can to mitigate these risks as much as possible.
For example, an office-based company might have larger risks in the form of lawsuits from dissatisfied customers, while manufacturers might have to deal with the risks of machinery operated incorrectly. If you’re aware that your company has machinery that needs to be operated, understand what the machines are made of and how they can break. The cable and materials of metal fabrics are typically 60% recycled materials and 40% new materials. The better you know your equipment and materials, the more aware you are of the potential sources of risk and loss.
Have The Right Insurance
Once you’ve assessed what sort of risks might be associated with your business, start shopping around for different types of insurance. Not every business will need the same coverage, but having at least some coverage can minimize your losses should something go wrong. Remember that your insurance might need to cover customers as well. Only 4% to 5% of personal injury cases go to trial. At least 95% of personal injury claims are settled pre-trial in the United States.
Keep Business Separate
Finally, the most important thing to keep in mind when organizing your business finances is to keep your personal assets entirely separate as much as possible. Establishing your business as a separate legal entity is an important step for ensuring this. Also, don’t use personal finances to supplement business purchases. Any time you use personal finances for business reasons, you’re risking combining the two. When this happens, business losses can ultimately mean personal losses.
Managing business accounting can be a struggle, and sometimes it’s tempting to just put everything on your own personal accounts and cards. However, it’s crucial to take these steps to separate your personal and business finances, as well as protecting your business from losses. Doing this can help keep you safe if something goes wrong with your business.