Most small business owners have mixed their personal finances and their business finances at one point or another. There are a few problems that can arise when you do this though. There are benefits that come from separating your business finances from your personal finances. Understanding the problems that can arise from this helps business owners understand the importance of keeping their business and personal finances separated. Mark Dicus & Company is here to talk about some of the reasons why separating their personal and business finances is so important.
How Mixing Finances Can Hurt Your Business
There are several ways that your business can suffer when you mix your personal and business finances.
– Bookkeeping Issues: The last thing any business owner wants is bookkeeping mistakes. When there are mistakes in your financial statements, it can have lasting consequences. When you’re mixing personal and business finances, there is an increased chance that you will have mistakes in your record keeping.
– Missed Deductions: One of the biggest benefits of a small business is the opportunity to take advantage of several deductions. You may have business expenses that are getting overlooked, which means that you’re missing out on money.
– Cash Flow Confusion: When your cash flow is clear and concise, it can make doing business a breeze. You need to have a clear picture of your finances so that you can make sound business decisions that will help your business grow. If you’re mixing personal and business finances, it can lead to cash flow confusion.
– Unprofessional: You will likely need to borrow money to make money at some point in running your business. If you are mixing your personal and business finances, it can look unprofessional to potential lender, investors, and your clients.
How to Clean Up Your Personal & Business Finances
If you have mixed your personal and business finances in the past, there are things you can do to keep them separated.
– Dedicated Business Account: It is important that you have a dedicated business account that is completely separate from your personal accounts.
– Pay Yourself: Come up with a schedule to consistently pay yourself and stick to it. Don’t randomly dip into your business accounts.
– Track Transactions: Make sure you are categorizing every transaction and business expense.
– Reconcile Monthly: You should comb through your statements every month to ensure all the expenses are categorized correctly.
– Reimburse Correctly: Sometimes, you may find yourself using personal funds to take care of a business cost. Make sure you draw from the business account to pay yourself back right away.
Bookkeepers, Accountants & More in Summerlin, North LV, Henderson, Lone Mountain Village & Greater Las Vegas, Nevada
If you need help handling the accounts for your small business, you can turn to Mark Dicus & Company for all your bookkeeping, accounting and tax preparation needs. We will help you reach your goals for financial growth and business success. Call us today!