Salim Mwachiro left his farm one recent Friday afternoon satisfied that his instructions were well understood. He wasn't going to be in the farm the next day but he trusted that the labourers he had hired to till the land would not disappoint.
Though the Coast-based farmer and trader preferred personally supervising any work on his farm, he had to attend a relative's wedding that Saturday. Paying the labourers was not going to be a problem because he had received some cash from another line of business.
On Sunday afternoon, one of the labourers called to say the work had been done but they were wondering when he was going to pay them. Mwachiro looked at his mobile money balance and was shocked to find it was almost at zero! During the wedding, he had spent quite a bit of money on treats for his family forgetting that he had wages to pay.
On the phone, the labourers seemed angry that Mwachiro was stalling on paying them but he did not have the Sh3,000 they were rightfully demanding. He broke into a sweat and felt his heart rate quicken as he wondered what to tell the men. As Mwachiro scrolled through his phone contacts looking for someone he could call for money, he remembered something that turned out a lifesaver.
On Friday evening, the day before the wedding, he had the presence of mind to transfer Sh3,000 to a separate mobile money account. He did this knowing he might be tempted to use the money at the wedding. He quickly checked the balance on the other account and behold! The money was there! It was such a relief for Mwachiro not to have to explain to irate workmen why he could not pay them.
Mwachiro's story shows the dangers of not separating personal cash from money meant for the business. The story also shows the benefits of doing so. When starting a business, consider setting up a business bank account or mobile money wallet to help keep track of business finances.
Lots of people mix their business and personal finances making it impossible to know if the business is making any profit. Co-mingling of funds tempts business owners into believing they have lots of money for personal spending but, in reality, they are spending money meant for the business.
With a business account, you'll find it easier to track your expenses and income. Keeping your private and business transactions recorded separately can save you time and money when it comes to preparing financial documents, activity statements and tax returns.
Wherever possible, use your company's name when registering for such utility services as electricity, water supply, internet services and mobile phone lines. Those accounts are part of the expenses your business must pay each month. If you pay business utility bills with personal funds, you may not get a true picture of whether your business is generating enough income to sustain itself.