As bookkeepers in Raleigh, we always encourage clients to keep business and personal finances separate. Many believe that since they have a small business or a hobby business, they can get away with not going through the hassle of setting up dedicated accounts and financial systems, but we disagree. It doesn’t matter how small a business is, keeping separate financial records makes it easier to manage financial matters.
Here are a few tips to help keep business and personal finances separate:
Have separate accounts: It’s surprising how many people use their personal account to run a business. It’s simple to set up a separate business account with a separate credit card, and it does a lot to separate finances.
Set up separate filing systems: They can be the same type of system if it works for both personal and business needs, but they need to be separate. Keep separate files for receipts, bills and other paperwork, as well as separate electronic documents for business and personal finances.
Give yourself a salary or wage: Treating your pay as you would that of any other employee will make it easier to draw the line between business finances and personal finances.
Set limits: Many owners will expense spending such as travel and dinners out in order to be able to deduct it from their taxes. It’s tempting to go to the fancy restaurant with friends and ‘talk shop’ for a few minutes just to write it off, but the reality is that it’s blurring the line between personal and business and the tax write off usually isn’t worth the expense of the elaborate outing.
Keeping personal and business finances may seem like a difficult step, but in reality, it makes it easier to manage finances and adds a layer of protection to personal finances. Let Raleigh Bookkeeping help with your business finance needs.