It goes without saying, you should always separate business from pleasure. It is the same thing with your finances – never tangle up that what is meant to be for your personal use and what is suited for your business. Consequently, by doing so it will be much easier to figure out what you can and what you cannot deduct at tax time. Just bear in mind that it is never too late to start planning and separating all of your records into personal and business stacks.
Separate checking accounts
If you set them up, you will diligently be able draw on the right account at the right time. By reviewing your bank statements you will get a clear picture of your cash flow, just try to use only your business debit card; avoid the use of cash itself. Also, you might even be able to do, for instance, your taxes and other financial reports straight of your bank statements.
Keep the receipts
Do whatever you can to physically separate your personal and your business receipts. Shoe boxes are a symbolic place for stashing all that relevant paper, but the most important thing is to collect, sort out and prioritize it accordingly, no matter where you safeguard the arranged pile. Truthfully, tax auditors don’t really care how much money you spend annually, but the business receipts will surely peak their interests.
Business credit card
It will simply help you build up your credit history which will consequently separate everything from your personal history. Credit cards will easily confuse and muddle your finances, so a clear distinction between the two will sort out your budget and help you keep track of everything.
Set a business budget
You are probably not keen on pulling more money out of your business than it can afford, however what is even worse is when the business you run pulls more money out of you. This is common especially for small businesses, because owners can spend a lot of money from personal accounts whenever things start to go bad. It is understandable, though, it tends to be unavoidable, but a clear budget that focuses on your current business earnings will help avoid such shortfalls.
Include your family and business partners
Don’t be the only person who keeps track of finances. Sometimes help on the side can either make a smart suggestion or notice something that you’ve missed. Making sure that everybody is on the same page and well informed can prevent many future problems from occurring.
Draw a crude line between home and office
This division will help you put things in perspective and also in order. Home finances that include, for instance, schooling and other expenses for your kids can be practically dealt with just by using the School Easy Pay account card. However, if you have a home office, make sure that your business doesn’t pay all of your electrical bills. Instead, let the part of the burden fall into your own personal finances.
Using a personal item, like a car or cell phone for business purposes on a regular basis should prompt you to keep track of such splits. Naturally, it would be much easier if you can separate both the car and phone just for your business, but if that is not the case, logging tools should be put to use. Practically, every smart phone has a log of business use.
Ask a professional
If you want to clarify certain things or avoid mis-classifying some expenses, do not shy away from asking a professional to help you with your relationship with your finances. It is their duty to establish you a system that you can work with. Remember, it is better to be safe than sorry, so any help is welcome if you hit a wall and don’t know how to get out of the gutter.