How to keep your social enterprise and personal finances separate
Never mix business with pleasure – that’s the motto, isn’t it? Only, when you’re operating in the wonderful world of social enterprise, business and pleasure often feel intrinsically linked.
There’s nothing wrong if that’s how you feel as a social entrepreneur; it demonstrates that you truly love what you do. But what if that mindset creeps into the more business-oriented areas of your operation?
Finances, for instance, can become problematic if the line between your own and those of the social enterprise is blurred. And it’s an easy trap to fall into; you might start off solo and therefore only have one bank account and no real salary to speak of, after all.
Regardless, it’s best to avoid this inadvertent crossover if you can, which is why we’ve put together our favourite tips for keeping your social enterprise and personal finances separate.
Open a separate business account
Despite the choice you’ve made to go down to route of social enterprise, you’re still running a business, and opening a separate bank account for that purpose as early as possible is advisable.
If everything ends up in your personal bank account, separating the enterprise’s income from your own personal cash becomes nearly impossible, and it’s far too easy to inadvertently spend money that should be reserved for cash flow purposes.
Just make sure you shop around for a business bank account. Banks often run discounts for small businesses or offer introductory free periods, therefore the point of entry should be relatively cost effective during your startup phase.
When first starting out as a social entrepreneur, you might not be able to pay yourself much of a wage – if anything at all. This is all part and parcel of the journey, and a sacrifice you may have to make during those early days.
However, as soon as you can afford to pay yourself a salary, do so. By maintaining a consistent income for yourself from the social enterprise, you’ll avoid the need to dip into the business bank account simply to pay your gas bill or put food on the table.
You’ll know when you can comfortably pay yourself without harming cashflow, and when that time arrives – embrace it!
Keep business savings separate
It’s common practice for a business to have a separate account for savings. This enables the owner to put cash to one side for future investments, tax payments or simply to provide peace of mind that the business has extra cash to call on if it ever hits hard times.
As a social entrepreneur, you should do the same. It might be tempting to instead treat your own personal savings as a piggy bank for the business, but that’s no better than sharing a current account; those savings are intended for your enjoyment – the business has its own needs.
Consider a business credit card
If you’ve used your own personal credit card to help finance the social enterprise or purchase goods, equipment or materials that will enable you to operate and grow, it might be worth considering a business credit card instead.
Relying on manageable credit that you can repay is no bad thing, but one should tread with caution, too. Depending on the age of your social enterprise, you may not have a high enough credit rating to get the best credit rates, therefore some thorough research is required before you take the plunge.
It isn’t easy keeping business and personal finances separate when you’re a social entrepreneur, but doing so will save you from a significant amount of heartache and accountancy complications in the future.