The Financial Risk of Commingling

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When you mix your money with business funds or assets of another person; you are commingling funds. This is a violation of ethics no matter what profession you are in.

Examples of commingled funds would include:

  • A real estate agent that puts his client’s down payment in his or her personal bank account.
  • A banker pools together individual customer accounts into a mutual fund.
  • A broker combines customer-owned securities and brokerage-owned securities.
  • A lawyer holding client’s funds deposits into his personal bank account.

Commingled assets are similar to commingled funds because you are combining your assets with your client’s. But what you may not realize is, by doing this you are also putting your own assets at risk.

To avoid commingled assets or commingled funds, set up a separate business account and use it strictly for funds from customers or clients. Your personal bank account should only be used for your own personal funds and use.

As a professional, it is your duty to ensure you are not commingling funds. It is not only your duty but in many cases it is considered illegal. Sure, if the money is paid back promptly then who will be the wiser? In such a case it is not considered illegal however, it is still bad business and you are sure to ruin your reputation the minute funds are lacking.

When it comes to mixing your personal funds with your business revenue there is only one thing to remember; don’t do it. It’s very easy to think, “I’ll just replace it later,” but it isn’t worth opening yourself and your business to that risk. Keep in mind; you are spending someone else’s money when you commingle funds – and it’s more than likely they won’t appreciate it.