8 Easy Tips to Separate Your Personal & Business Finances
When running a business, separating the money you use for your business from the money you use for yourself is important.
Failing to do so can create an accounting nightmare and can have legal implications.
Here are eight tips on how to separate business and personal expenses:
1. Open a Business Checking Account
One of the first things you should do to keep business and personal expenses separate is open a business checking account. A checking account lets you see how much money is available to the company at a glance and will keep your personal savings from getting mixed up with the company’s.
2. Establish Different Places for Company Receipts
Set up two distinct places to keep personal receipts and business. If you don’t have a system for keeping receipts separate in a month or two everything will be jumbled together. Once this happens, deciphering which receipt goes where will become much harder.
3. Log When Personal Tools Are Used for Business Purposes
Sometimes it is easier to print documents from your home office than heading into work. While this is fine, you should set up a log of when you use equipment you own to track when they are used for the business. Small expenses add up, and if they are used for the company they should be paid for by the company.
4. Pay Yourself a Salary
Make your position in the company official by setting up a salary for yourself. This helps create a paper trail for how much money you are receiving from the company. It also helps you keep business and personal expenses separate because it means that you don’t have to take money out of the company account when you need cash for your personal life.
5. Open a Company Credit Card
Sooner or later there will be an expense that needs to be addressed that will exceed the amount cash you have on hand. With a company credit card, you can take care of this business expense without having to dip into your own money. This also is a good way to help the business establish credit.
6. Set Up Utility Accounts in Business Name
If your office incurs separate water or electrical bills, put those in the name of the company. This way if there is any issue with keeping those paid, it won’t come back to affect you.
7. Create an Online Business Presence
Establishing an online presence for your company has many advantages. It is great for marketing, visibility, and will help keep your finances separate by helping people understand they are dealing with a business, not just you.
8. Speak with an Accounting Professional
If you are having difficulty finding a good way to keep your finances separate, contact a professional accountant. They can help you and everyone else involved in the company understand why it is important to separate personal and business finances and figure out the best way to do so.
Keep your company’s money separate from your personal funds to ensure a legal and profitable arrangement with your business.