Financial management is one of the pitfalls for people who are engaged
in a home business. Even if your have choose a good home business but
you have no idea on how to manage your business financially, you will
most likely end up losing a lot of money. Since you cannot afford to
waste your money, you better shape up and take care of your finances
early on. It will not really do you any good if you just keep working
on your business not really knowing if you are making enough money to
compensate for your efforts.

Getting started

The first thing that you need to do to get your financial systems in
place is to open a separate bank account for your business. A lot of
home business owners keep their personal funds together with their
personal accounts that they end up drawing money which should have
been for the business and vice versa. The practice of mixing up your
personal funds and the funds for your business is very dangerous
because you will not have much control over you business and personal
finances. By opening separate bank accounts for your business and for
personal use, you will be able to manage your money better.

Aside from setting up a separate bank account for you business, you
must see to it that you also set up a separate funds for your business
expenses. Since you are working form home, try to separate all the
expenses that are related to your business from your home expenses.
For instance, your business phone should be paid by money coming from
your business account. You might also want to ‘bill’ you business for
utilities and rent. You can do this by setting a certain amount every
month for utilities and rent then take this amount from the business
account.

Out of your business earning, you might also want to set up a certain
amount which you can draw out as your salary. The good thing about
setting a certain amount of money every month as your salary is that
you will be able to determine if you are indeed making enough money to
pay for all your business expenses and at the same time pay yourself
for your efforts. Make sure that you only draw-out the extract amount
of money from the business for your salary. Even if your business is
doing well and you have plenty of money in the business account, do
not be tempted to draw more than you should. Keep the money in the
business account for future use. You might want to expand your home
business later on.

At the end of the year, you might want to give yourself a bonus. If
you have been religiously following your own rules regarding your
finances, you will be surprised at how much money you will have left
in your business account at the end of the year.

extract in http://www.myhomebusinessadvice.info

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