Launching a new business can be an exciting adventure. While starts ups are full of exciting ideas, business owners must focus on the important aspect of managing their finances. The biggest mistake they can make is not separating their business and personal finances. Separating your finances can help you track profitability, monitor your cash flow, and make accurate reporting at tax time a breeze.
In This Post:
Maintain Separate Checking Accounts
While this option seems obvious, many new business owners create a habit of paying for business expenses out of their personal accounts and never go back. Open a business checking account early to maintain separation. This one simple step provides credibility for your business and will help with record keeping all year long.
Apply For Credit
Obtaining a business credit card is not only as easy way for you to pay for expenses, but will also help in record keeping. A business credit card will help you build a credit history for your business, and if you carry a balance, the interest can be an extra tax deduction. Lending requirement can be strict, but the benefits are worth it if you qualify.
Receipts and Expenses
Keep your receipts and expenses separate for the business. For receipts, consider having checks made out direct to the business or purchasing a hand held credit card terminal going directly to your business account. The right credit card processing can make managing income a breeze for business owners. For expenses, make sure to separate your business and personal receipts all year long. Waiting until tax time to separate receipts will result in inaccurate reporting and a possible audit by the IRS.
Right from the start, it’s a good idea to pay yourself a salary from your business account. Your salary can be fixed and paid by check or distribution. This helps you and the IRS track your actual salary from the business and helps you differentiate your investment back into the business.
Build A Budget
Many new business owners are excited for their new venture and can tend to overspend on their start-up. Building a budget helps you keep your business spending in check, keeps your business operating, and cuts down on the urge to pay for those business expenses out of your personal checking account.
As your business continues to grow, it is essential that you set yourself up for success by keeping your business and personal accounts separate. These tips can help you get started on good financial habits for your business.