Last Updated on Mar 13, 2020 by James W
Mixing your personal and business finances can seem reasonable, especially if you run a small business or an online enterprise. However, it is crucial to treat your business as a separate entity and keep it away from your finances. Among the significant reasons to do that includes maintaining a professional image, saving time to reconcile the numbers, and tax reasons. Putting a clear line between your money and the business money can be hard at first, but these five tips will help you start somewhere.
- Pay yourself a salary
Most of the time, business owners take some money from the business cash box at the end of the day to do home shopping and fuel the car. Doing this will make it very hard to reconcile business expenditure and your profits. Instead, pay yourself a basic salary and stick to it. The salary will be a business expense that you can now use for your personal needs.
- Have a business credit card
Most people are disciplined when it comes to pulling money out of their business. Unfortunately, they use their finances to keep bailing out the business, especially when it’s a startup. While this is unavoidable, sometimes, you can use a different credit card for the company. If things go wrong, your credit score will not be sunk. Opportunity Business Loans will hold your hand as you look for a suitable lender for your business.
- Set up a Legal Liability Company
Legally, an LLC or corporation is an entity on its own. What that means is that any lawsuit against your business or any financial issue will not affect your finances or your assets. An LLC also comes with its bank account, so you will never mix the business money with your own. Any income will go directly to the business account, and you will pay expenses, including your salary from the same account.
- Get accounting software
An Accounting software like QuickBooks can help you to track all your business income, expenses, and all transactions in real-time. You will also be able to generate a statement if need be and refer to it when you are in doubt. If your business is too small for accounting software, you can use PaySimple to classify different transactions.
- Dedicate a separate office space
If you run a home-based business, it’s crucial to dedicate a separate office space. Working from your couch is one of the reasons there is a blur between you and the business. You can choose one of the bedrooms or storage unit and convert it into an office. Make it very official so that everything you do there is business-related and considered as such.
If you had not separated the business finances from your own from the word go, it’s never too late to start. These tips will start you off in the journey of financial freedom and less paperwork. If you make a mistake along the way, correct later on and reconcile the figures.