Most people think that business finances are the same as personal finances. There are similarities, of course, though the differences will bite you unless you know about them.
Let’s get the similarities out of the way first. You do need to balance your account – you can’t spend more than you have. You can have a mix of facilities – transaction accounts, debit and credit cards, online services, and a host of different places to use each one.
You do still need to look for good value for your spending, but maybe the definition of what’s good value can change. Let’s explore that.
The first major difference is that most of the time you are on opposite sides of the transaction when you spend your own money. What I mean is – when you buy something for your personal consumption you will never see that money again. You want the lowest possible price. The seller want’s the highest possible price, because that’s where there profit is.
When you buy something that you intend to sell for a profit the person you buy from is now on your side. They are instrumental in you making money. In fact, without their supply you can’t be in business. It is in their best interest to make sure that your business thrives, and continues to buy from them for a long time to come. You now recoup the purchase price when you sell the item. That’s very different from buying something for your own use.
You still need the best that your money can buy. That doesn’t change, unless the supplier that provides that product has problems delivering on time, or maybe only supplies larger quantities than you want to order. The best value for your business – the product that allows you the highest return – might be 95% of the quality, 80% of the price and 100% better delivery conditions.
See how your mindset has to change when you run a business?
Do you have a question, or a comment on what other differences there are? This isn’t supposed to be a complete list, just a place to start the conversation. Let us know what you think by using the login tag on the left side of the screen.