Separating the personal and business finances should be at the top of your list if you want to become a successful entrepreneur. Separate business and personal finances not only help you stay organized but also provides peace of mind, especially when it is the tax time. It also protects your personal assets along with offering an array of other benefits. According to the experts, differentiating between business and personal finances should be the top priority of a business owner for managing money the right way.
As a business owner, if you have not yet separated the money records in personal and business files, then it is never too late to get started. Below are a few practical tips to help you separate your personal and business finances effectually.
Set a Budget for the Business
As you really don’t want to pull money out of your business for personal spending, you should also not pull the personal money into the business to keep things separate. Creating a business budget plan is the best way to effectively manage business money for several business overheads without pumping money from personal accounts. Use of personal money during the business shortfall is unavoidable, but having a great budget plan can help you manage things effectively. Having a clear budget can help you keep personal and business finances separate.
Get a Business Credit Card
It will keep you from using your personal accounts for business payments and expenditures. Having a business debit or credit card enables you to make business-related transactions conveniently without using the personal ones. A lot of financial institutes and banks offer small business credit/debit cards on easy terms that can be used by all types of businesses for their business transactions. Most of the credit card providers offer their services with mobile apps that make it easy to keep track of transactions in real-time.
Set up Utility Accounts in the Business’s Name
As a huge part of the business budget can go for utility bills each month, you should establish all the utility services accounts under the business name to keep them separate from personal ones. As you might be using some great ways to cut on your household bills, you should also find some ways to cut on business utilities and to keep them separate as well. Either it is the mobile phone service, electricity or gas, get all the connections on business name and pay them accordingly to keep the business operations running smoothly.
Get Paid by the Business
Instead of using business money for personal expenses and needs, get paid by the business on a monthly basis to meet personal needs effectively. Write yourself a check as your salary and use that money to fulfill all your personal and family-related needs. It will allow you to manage that personal money for day to day needs and will also keep you away from unnecessary spending.
Separate your Receipts and Track Properly
Bookkeeping should be one of the major concerns when it comes to separate personal and business finances. Either personal or business-related, receipts should be kept in an organized manner. As a lot of receipt tracking tools and apps are available on the web, you should also be keeping a physical record of all the receipts to get them quickly when needed. Keeping personal and business receipts separate helps a lot at the time of tax return.
Draw lines between home and office
It could be helpful a lot if you are running business operations from a home office. Draw lines between home and office to keep the expenses separate. Even if you are working from home office, you should divide the office bill and other utilities to pay them from business money. Never try to pay for the office meals from your personal credit or debit card and use one under the business name.
Keep Track of Personal stuff Used for Business
A small business owner might be using the same car for a business tour that he/she uses for going to the gym or market. The same can go for mobile phone and other common things. That is the reason; you should be keeping proper track of personal stuff/things used for the business to create a reimbursement report at the end of the month. Any expenses made from the personal money should also be kept separated to pay them back accordingly. It will not only help you keep personal, and business finances separate but will also help a lot at the time of tax return.