There are many small business owners who will tell you that they most definitely did, or do, have accounts that they use for both personal and business purposes. It is an easy mistake that many business owners make. It seems like it is no big deal. However, when you mix your personal and business finances, it comes at a cost that you may have never considered. Mark Dicus & Company is here to talk about some of the problems that can arise when you are mixing your business and your personal finances.
Ways Mixing Business & Personal Finances Hurts Your Business
It may seem innocent enough, mixing your personal and your business finances. However, there are bigger consequences for this than you may think. When you mix the two, it can be quite problematic. Here are some of the ways it hurts your business:
– Bookkeeping: The last thing you want to have is bookkeeping that isn’t organized. When you are mixing your personal and business finances, it can muddy your bookkeeping and make taxes and other financial aspects of your company far more complicated than they need to be.
– Missed Deductions: One of the many perks that comes with owning a business is the ability to deduct from your taxable income. When you mix business and personal finances, you may miss legitimate business expenses that you could be deducting.
– Cash Flow: You need to have a clear understanding of where you sit as far as your cash flow is concerned. Knowing what your business is earning and spending is a vital part of owning a successful business.
– Unprofessionalism: When you are trying to get financing for your business or are considering a partner, it can look unprofessional to have your business and personal finances intertwined. Even your clients are going to expect you to have them separated.
Tips to Separate Business & Personal Finances
If you haven’t got your business and personal accounts separated, here are the steps to do so:
– Open a Business Account: It is time to open a new account that is specifically going to be used for business.
– Pay Yourself: You should set up a schedule where money is moved to your personal account on a regular basis so that you are paying yourself. This is also known as an owner’s draw.
– Track Transactions: Record keeping is vital. Categorize every business expense so that you know where money is coming from and going.
– Reconcile Monthly: It is important that you are reconciling your accounts on a monthly basis so that you know where you stand financially.
Tax Preparation, Filing, Planning & More in Salt Lake City, St. George, West Valley City, Provo, Orem, West Jordan & Greater Cedar City, Utah
As a small business owner, you are going to need an accountant to help you organize your finances and help you reach your goals as a business. Mark Dicus & Company is here to provide you with all the bookkeeping and accounting services you may need. Call us today!