Just starting your small business and wondering how different your business financials should be compared to your personal finances? There are a few differences since they serve different purposes. Here are the differences and a few ways you can keep them separate.
These help you understand how much you are spending to make sure you are staying on a budget. Or it can even help you establish a budget and keep track of all aspects of spending. It also helps you understand what kind of payments on any debt you can be making to reduce the debt.
This is necessary to understand how much money your business is actually making by keeping a record of revenues and expenses. When it comes time to files taxes, the government is going to require you to produce financial statements and without some sort of bookkeeping this will be impossible. Your business is a separate entity from you, so your financials should not be together.
Ways to Keep Finances Separate
- Set up separate checking accounts (Did you know we can help with this one!)
- Use separate locations, such as filing cabinets, for receipts
- Set a budget for the business so you do not have to pump extra in to keep it running
- Give yourself a salary and do not exceed it
- Get a credit card for your business so you do not use yours
- Identify home and office clearly to be able to claim a deduction on home office
- Lastly, log use of any personal items if used for business use, such as your phone or car
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