Separating your business from your personal life is vital in many ways. Not only is it great for your mental well-being and health to divide the two, but it’s also great for your finances. Any bookkeeper or accountant worth their salt will tell you that. If your business is a separate entity that you’ve taken the time to legally carve out and create an LLC, partnership, or corporation of some format, don’t start mixing those finances with your personal finances. Not only does this cause more stress for you, but it could have severe legal implications.
It can be hard to keep the two separate, we get it. Although your business is a stand-alone thing, it is still YOUR business. It can be hard, not to mention time-consuming, to keep the two apart. Here are six useful ways to separate your business and personal finances.
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Separate Bank Accounts
Simple and to the point. Make sure your business has its own bank account. This way when it comes to the end of the month, you have a single record of all deposits and withdrawals that are only related to the business.
Separate Credit Cards
Yes, a business credit card and a personal credit card are different things. If you’re going to have separate chequing accounts, you should have different credit cards for business and personal uses, too. The same reasons apply: it’s far easier for your bookkeeper or accountant to do your finances when the statements are separate.
Separate Your Receipts — Your Bookkeeper Will Thank You
Make sure you’re organizing your business and personal receipts as you get them. This is one of those things that may seem a little old-fashioned, but at the end of the day, separating receipts as you go saves you time later. Even if you’re not doing your own bookkeeping, your bookkeeper will thank you, too. Not to mention the longer you leave it, the fuzzier your memory will be about what’s what.
Keep Track of Things That Are Divided Between Business & Personal
There are some things you can’t separate as easily as a bank account. Think of your car, cell phone, or home office space. Do you use these things for business and personal tasks? Chances are you answered yes. Some items walk a thin line between business use and personal use. Therefore, you should keep track of when they’re used for which purpose. You can write off a lot of the expenses accrued from these devices and items, but you can’t write 100% of them off.
Give Yourself a Salary
If you give yourself a clear salary, this wage expense will come out from the business account each month. This is a great way to divide the business finances from your personal finances and keep a clear record of the salary. This division can also help you to recognize business money as belonging to the business instead of a secondary source for you to tap into unchecked.
Don’t Use Business Money for Personal Reasons
This goes hand in hand with the last tip. Once you have that salary, stick to a budget within that amount. Too often, we overhear people in restaurants joking with their spouses about how they “kind of discussed work.” Then, they pull out the business credit card to pay for the meal. Sure, they have a separate card, and they’re keeping the receipts separate, but the chuckles tell us that business was never actually discussed at Sunday brunch with the kids.
Make sure you’re not blurring the lines between what’s a business expense and what’s personal. This rule applies to the business, too. Your personal account is not a bottomless pit for the company to pull from whenever times are a little tight or slow.
What this comes down to is that you may own your business, but you’re not your business just as your business is not you. However, when the bookkeeping and accounting need doing, it could end up saving you time and a lot of headaches.
Managing your own bookkeeping for your business and personal finances can get pretty confusing and time-consuming. We understand why many entrepreneurs begin to blur the lines a bit. If you’re looking for a bit of help separating your business from your personal finances, we’d love to help you get back on track. At Genesa, we offer you more than just an accountant, we’re a team of dedicated professionals helping you solve your business issues. If what you need is some advice and support to get your business out of your own personal accounts, we can help you. Give us a call today and let us help you get your personal finances back to being just that — yours.