Entwining personal and business finances will only end up in a disaster almost all the time. As an entrepreneur, separating them might seem unnecessary as your business is your own baby, but in the long run, this can be harmful to your personal savings.
Why is this Necessary to Separate Business and Personal Finances?
Easy to Calculate Taxes:
The reason we emphasize you to keep your business and personal account separate is that it is easy to calculate your taxes this way. If you mix up these accounts then at the end of the financial year, you will have to take up the task of calculating your business finances and separating it from the personal money in your account. This is not just time-consuming but also can cause human error. So an easy way to do this is to maintain separate accounts.
Understanding Cash Flow Becomes Simple:
As you maintain a dedicated account, it is easier to track the cash flow to understand if your business is doing profit or not over any duration of time. You will also control your spending as you know the exact business amount in the account.
You Will Not Lose Your Personal Money:
If you use the same account for business and personal finances during a business crisis, you will be tempted to use your personal money as it might seem like a one-time thing. Slowly this may turn into a habit and later on you will realize you have no more savings left. Build a business emergency fund for such a scenario.
How can You Implement It?
Establish Your Business as a Completely Separate Entity:
Your business is not part of your personal life. Entrepreneurs do the mistake of mixing up these two in terms of finances as well as a time division. Treat your business like any other job and keep it separate from your personal life. If not, you will completely lose control of your personal time and money.
Record the receipts Separately:
Physically separate the receipts for transactions made for business and do not add them to the personal expenditure pile. This will make it easier for you to track business expenses at the end of the quarter.
Look for Additional Income:
The main reason many entrepreneurs make the mistake of mixing up the finances because of the business ups and downs that need them to look for extra capital. A simple solution is to start a side investment different from the main business that does not need you to spend a lot of time but helps in making extra income. Trading in Bitcoin using Bitcoin Trader software can be an easy way to get good profits as the automated software makes it easy for you to earn easy money. To know more about this go URL.
Apply for a Business Credit Card:
As you have separated your business account, also apply for a business credit card. Any expenditure you make for your business should be made using that card. This will aid in not mixing up your finances and maintain the needed gap.
Drawing a line between your personal and business finances will make sure that there is a boundary that protects your saving from any business losses.