Separate Business and Personal Finances 6 Practical Tips
Posted On: 27/06/21 - 0

Running a small  business is already challenging. The first thing you want to do to keep finances from getting complex is separate business from personal finances. Here are six simple tips that are suggested by small business accountants for separating your finances.

1) Use Separate Credit Cards

Using two different cards when running a business is essential. This will free up so much of your personal finances. When you cannot pay for business-related expenses, you immediately get tempted to swipe your personal credit card. However, with two separate cards, one for business and and one for  personal transactions, this problem would not arise.

2) Create Two Checking Accounts

Two separate checking accounts for business and personal transactions will help you to draw from the right account for valid purposes at the right time. Later, when you have to do taxes, you can have a clear view with bank statements.  This will also save you bookkeeping fees, because the bookkeeper does not need to separate business and personal finances for you.

3) Always Save Receipts

For whatever expense and income that takes place, keep track of your receipts. You can focus more on your business receipts than the personal ones because a tax auditor is not interested as much in your personal expenses. You can organize your business receipts in a coordinated way.

4) Pay Yourself A Salary

Now that your business is a legal entity, you should start to pay yourself a certain fixed amount of salary. You can write a check from your business checking account to your personal.

5) Understand What is a Business Expense

Use careful consideration and transparency when writing certain transactions off as a business expense. You cannot use it as a pass to go for dinner with your family, etc. You have to understand and discipline yourself from spending your business finances on expenses unrelated to your company. The CRA can at anytime target you for an audit, and if they find any “inconsistencies” when it comes to a business expense you could be setting yourself up for disallowed claims and you may be on the radar for future audits.

 6) Have a Budget for Your Business

You do not want your business to take up a lot of your personal investment. To ensure that this does not happen, most small to mid sized business accountants suggest that you need to set a budget for your business and personal finances. Not only will it help you separate the two, but also saves up important corporate cashflow.

All these tips will not just help you separate business and personal finances but also keep you organized in your life. For whatever reasons you are not able to implement these tips, you could hire a small to midsized business accountant depending on the type of company you run. For more information, please call Cheryl at 780-482-7297

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Edmonton, Alberta.
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780.482.7297