Simplify Your Finances: Business Vs. Personal Accounts

Blog Post #104

Managing your finances efficiently is vital to your ongoing success. However, I’m sure like most business owners, running your business and making the money is most likely at the top of your list. 

So, how do you make managing the money a priority as too? By making it as simple as possible!!

One of the simplest (and most effective) places to start is by separating your personal and business accounts.

Sounds so easy right? Well, you may be surprised how common it is for business owners, no matter how long in they’ve been business, still commingle the two.

If this is you, no worries. You are not alone, but it is an important and easy strategy you can implement starting today.

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Benefits of Keeping Business & Personal Accounts Separate

Easy Bookkeeping: Mixing personal and business transactions can create confusion and wasted time. By keeping your accounts separate, you make it easier to keep up with and track your business activity. 

Straightforward Financials: Know exactly how much you are making in your business and keep personal spending separate from business costs. This allows you to manage your budget, cash flow and plan effectively. 

Better Financial Insight: A clear picture of your business's performance and financial health, allows you to make better business decisions for future growth.

Smooth Tax Preparation: When it's time to file taxes, having separate accounts saves time, reduces errors and can maximize your deductions. All your business transactions are together in one place, simplifying your record-keeping and document process. Your tax professional will love you!!

Audit Protection: Since audits can happen at any time, having clear separation of your finances is crucial to be able to quickly verify business without personal things scrambling up your records.

4 Ways to Separate Your Finances

Use Business Bank Accounts:

• When you use business bank accounts you give yourself a clear path for getting paid and taking care of your business obligations.  There’s so many options for business banking these days, so my advice is always look for a bank that offers features most beneficial  for your needs. 

• A favorite of mine is Relay Bank. They provide easy-to-navigate accounts that are designed with business owners in mind and they make it seamless for you to work with a finance professional when needed.

• Having dedicated business accounts allows you to have control over your cash flow and ensure your business is set up for success.. 

Setup Business Merchant Accounts/Payment Services:

• Using merchants accounts is great for handling customer payments and even for paying for some of our own expenses. However, commingling these can cause some major problems. 

• I’ve worked with many clients who have over and under-stated income (which can cause a whole other world of problems), missed out on available tax deductions, and more. All by using their personal Cash App or PayPal for business transactions.

• These are probably some of the more simple accounts to set up as long as you have the right documentation. 

Utilize Business Credit Cards:

• Using business credit cards helps you manage your cash flow better, keep spending under control, and ultimately build credit for your business which can be used for many other benefits when needed.

• Some popular biz credit cards include Capital One and AMEX, but I’m sure your business bank has one for you. Having a business account with your bank usually helps your credibility with them.

Get Loans & Lines of Credit for Your Business: 

• Loans and credit lines can help with growing your business, cash flow management and more. Open these as business accounts to protect your personal credit and build your business’s credibility.

Action Steps for You

Add simplicity to managing your business finances. 

Here’s how you can start today: 

• Choose a bank that fits your business needs  and open accounts you need for your business. It’s always good to start with a checking and savings

• Setup business accounts for all your merchant & payment services

• Review your subscriptions and recurring payments for your business and make sure they are paid from business accounts

• Create a documented reimbursement plan in the case of having to use personal accounts for business transactions. 

In Summary 

When your financial management is simple, you are more likely to stay on top of it. Separating your personal and business bank accounts is an essential step. It not only helps with effortless record-keeping but also aids maintaining clear records and making better business decisions.

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Need help getting your finances together? Let’s Talk…