Monday, 6 November 2017

Finance Tips How to separate business and personal finance

A lot of emerging business owners often never separate their business finance from their personal finance.
It doesn't matter if it's your personal business. It is a bad financial habit not to separate business and personal finance.

No matter how small your business is, as long as it's a business venture, you need to differentiate between the two, so it won't muddle up your finances. Treat it like a big conglomerate.

Start by knowing how much you make in your business and separating it from personal expenses

Here's how you can separate business finance from personal finances.

1. Have different accounts for both finances
For better organization of your finance, you should open accounts for both business and personal finance.

It does not only help in proper organization, having two accounts also helps you to be tax-smart, making it easier to keep tax records and not mixing business tax with personal tax.

2. Put yourself on a salary
Put yourself on a salary every month from your business.

It makes it easier for your personal finance and also business finance to be on a budget.

3. Put your business on a budget
People keep putting money into their business from their personal account when there is money deficit which sometimes you cannot escape.

To avoid this, set a budget for your business, it makes you know how much you want to put into your business, which won't affect your personal finance.

4. Draw a line between business expenses and personal expenses
Don't mix up business expense with personal expenses.

Things like entertainment, food and travel should not be under business expenses. It should be under personal finance.  You don't want it to affect your business finance.

5. Home and office are two different entities
If your office is in your home, make sure you differentiate them both.

You don't want to be using your business finance to pay for utility bills. Personal finance should handle that aspect.

6. Keep logs
Always keep a log of every business use.

Probably you use a personal item, like a mobile phone or car for business purpose, you need to keep a record of it. Create a log to keep track of it.


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