Is it business or its personal?

Is it business or its personal?

Finally! I finally got the courage to create my first post. Yes, that's right! Despite having been on LinkedIn for several years now the only posts on my wall were either a work anniversary or a new job! As a PhD candidate, one would expect me to be quiet at ease with writing. However, I was not sure about what would make a good publication.

I will share an article I did for She Glows Magazine publication. This is a magazine published by She Glows in partnership with ZHEERA. Both these organisations are not for profit organisations in Zimbabwe which seek to equip women and youth with socio-economic skills in order for them to improve their lives, their families and to contribute to the social and economic development of their communities.

Here we go.......

I assume we all agree by now that the business is a separate "entity" from its owner. Whenever I go for a business stock purchase, I would find it as an excellent opportunity to do my personal shopping. Sounds practical, right? But if the business is going to pay for the customs duty of my personal home appliance and then that will be bad practice! The same goes for any additional attributable costs of transporting personal goods. They are your own goods and remember you and your business are separate?

As a general rule, business expenses must be expenses that are directly related to the business or specific business activity. Now here is a tricky one, what if I go and attend a business workshop or seminar, who pays?? If the business can do without your training, usually that would be your personal expense. The ideal scenario is that your business's accounts mustn't contain any costs that aren't "partly, wholly and, or exclusively" for the business's trade. If you put it in, you must add it back as "disallowable" expenses when you do your tax return. All money you take for personal use should be regarded as Drawings, and these are kept out of your profits calculations.

What if it is part business and part personal? An example of this, the internet and phone bills? Unless you can accurately distinguish how much of the whole amount is business or personal, this will generally be regarded as a personal expense. This separation of the business and the person does it apply to a small business such as mine? The answer is yes, it does. It's a principle. In addition to what we have discussed, separating the two comes with other benefits for you and your business. Having a well-separated accounting of the business and personal helps you avoid unwanted legal proceedings. The lack of proper separation between the business and the owner may result potentially in a breach of contract; the accusation of fraudulent misrepresentation; and claims of an indemnity or some other cause of action against you, rather than the business. Separating the business and personal transactions and recording them appropriately will also be very helpful when you want to engage with investors and potential partners. In the case of you seeking finance from a bank or other institutions, well-kept accounting books will give you a perfect chance.

That is also the reason why it is crucial to have your business incorporated by registering it as a company. Once you do so, it is vital to have a separate business bank account as this will help you monitor the business transactions. You can proceed to have a journal where you record all activities (transactions) that you engage in as they occur. When do we start? Start today – it might be that turnaround you need in your business! Be responsible and accountable business owners.  

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