SHG Business vs Household Expenses: How to Separate Them

To separate household spending from your SHG business, keep business cash physically apart, write every rupee that enters or leaves the business in one register, and take money home only as a fixed, recorded "draw". This one habit shows whether the tailoring, dairy, shop or food activity really earns, and it protects your loan repayment. The steps below work whether you sell for cash, by UPI or both. Rules referred to are as of November 2026; group and bank practices vary, so check with your SHG, village organisation (VO) or bank.

Self-help groups under DAY-NRLM follow the Panchasutras, one of which is keeping books up to date. Those are the group's books. This guide is about the member's own small business, which also needs its own simple record. For credit terms and loan doses, see NRLM SHG loans and Lakhpati Didi.

Why mixing money causes problems

When school fees, groceries and medicine come out of the same purse as flour, thread or fodder, three things happen:

• Profit becomes invisible. Sales look good, but you cannot tell what is left after costs.
• The instalment gets squeezed. Money set aside for the SHG or bank repayment is spent at home, and the group's account can fall overdue. Under the RBI master circular on DAY-NRLM, interest subvention is available only while the loan account is standard, so delays can cost the whole group.
• Working capital shrinks. If you keep eating into stock money, the next purchase is smaller, sales fall, and the business slowly closes.

The general guide to separating personal and business finances covers current accounts and owner salaries for bigger firms. Below is the version that fits a home-based or village enterprise.

What counts as business and what counts as household

The last row is the one most people miss. If you run a kirana shop and take two kilos of dal home, that is a household draw, not a "loss".

Step-by-step: set up the separation

1. Use two containers. One box, purse or pouch only for business cash. Household money stays elsewhere.
2. Open one register. A notebook with columns: date, sale received, expense paid, description, draw for home, balance. The village CRP or bookkeeper can show you a format if your SRLM uses one.
3. Decide your draw. Choose a fixed weekly or monthly amount you can take home. Start low; raise it only when the business clearly sustains it.
4. Set aside the instalment first. On each sale day, put the loan share aside before anything else. Use the EMI calculator to know the monthly amount.
5. Keep UPI separate if you can. If customers pay by UPI, use a QR code linked to a bank account you use only for the business, or note every UPI receipt in the register the same day.
6. Count weekly. Once a week, count the box, check the register balance and fix differences while you still remember.
7. Summarise monthly. Total sales, total expenses, draw, loan paid and closing cash. This one line per month is what the SHG, VO or bank will want to see.

A simple register format

Worked example: a tailoring unit with a ₹50,000 loan

Sunita takes ₹50,000 from her SHG's bank loan to buy a motorised sewing machine and stock. Assume the group passes on a monthly instalment of about ₹1,544 for 3 years (₹50,000 at 7% over 36 months; illustrative, the actual amount depends on the rate and tenure your group agrees with the bank and members).

In October she records:

• Sales: ₹18,000
• Cloth, thread, buttons: ₹7,500
• Electricity share and transport: ₹900
• Loan instalment: ₹1,544

Business surplus before her draw: ₹18,000 − ₹7,500 − ₹900 − ₹1,544 = ₹8,056.

She had been taking money home whenever needed and found the box nearly empty at month-end. When she totalled the register, household withdrawals were ₹9,200, which is ₹1,144 more than the business earned. She was eating into stock money.

She fixes a draw of ₹1,500 a week (₹6,000 a month). That leaves about ₹2,056 a month in the business to build stock for the festival season and a small buffer for a slow month.

When the household needs money urgently

Emergencies happen. Handle them so the business survives:

• Use the SHG's internal lending for household emergencies rather than draining stock money. Many groups lend from their own savings for consumption needs; the terms are set by the group.
• Record any extra draw clearly with the reason, and plan to rebuild the stock money.
• Tell the group if you cannot pay an instalment on time. Early discussion is better than a missed payment that affects the whole group.
• Avoid stacking loans. Taking a second loan from a microfinance lender to cover the first can lead to over-indebtedness. RBI rules for microfinance require lenders to assess household income and cap repayment obligations; read microfinance loan rules.

Common mistakes

How this helps with credit and support

Clear records help in three ways. They support the SHG's Micro Credit Plan for the next loan dose. They show household income from the activity, which SRLM staff use to track Lakhpati Didi progress (₹1 lakh or more household income a year). And they make it easier to apply for individual enterprise loans later; see loan schemes for women entrepreneurs.

If you plan to move to a larger loan, such as Mudra, banks will ask about sales and costs. The register you keep now becomes the base of that project report.

Key takeaways

• Keep business cash in its own box or account and household money elsewhere.
• Write every sale, expense and household draw in one register, and count weekly.
• Set aside the loan instalment before taking a draw; fix the draw at a level the business can afford.
• In the example, a fixed ₹6,000 monthly draw turned a ₹1,144 shortfall into ₹2,056 a month kept in the business.
• Use group internal lending for emergencies and tell the group early if an instalment is at risk.

Related guide: How to Reconcile an SHG Passbook With the Group Ledger.