In my earlier blogs I tackled the headaches of mixing personal and business finances and explored the benefits of keeping them separate. Now we’ll look at the nuts and bolts of putting this into practice.
Whether you’re just starting out or ready to make a change, here’s how:
Open a Business Bank Account:
- Choose a bank that fits your needs: Consider whether you’ll need to make cash deposits locally, or whether a digital bank will suffice.
- Consider Interest Rates: Check if the bank offers a favorable interest rate on your money and if they have interest based on combined savings and checking accounts. Look into any monthly fees and read the terms to see if there’s a minimum balance required.
- Banking Features: Does the bank offer features like online banking, mobile check deposits, or integration with accounting software? Make sure the bank offers tools and services that will simplify managing your business finances.
- Check the Fees: What is their monthly fee – if any? Read the terms to see if there is a minimum balance required.
Use Accounting Software:
- Online Apps for Versatility: Use tools like FreshBooks and Xero, which are probably the most user-friendly accounting apps around. They simplify tracking expenses and maintaining clear records.
- Receipt Management: Take advantage of the cloud accounting phone apps that allow you to snap pictures of your receipts and upload them to your accounting system, categorizing them all in one step.
- Portability and Accessibility: Online accounting apps let you manage your finances on the go, turning downtime (like waiting in the ferry line!) into productive time. That means more time for you to do what you love.
- Check Compatibility: Be sure to check if the software will connect with the bank you are considering for your business accounts before you open your accounts.
Apply for a Business Credit Card:
- Establish Business Credit: This is crucial for building your business credit profile, especially if you plan to take out a loan in the future.
- Interest Rates and Rewards: Look for cards with favorable interest rates and attractive rewards. Cash-Back rewards can effectively reduce your expenses, offering a discount on all your purchases.
- Pay Off the Monthly Balance: Be sure to pay off the balance each month to avoid interest charges and establish financial responsibility.
Set Clear Policies:
- Guidelines for Expenses: Use business credit card exclusively for business purchases, ensuring accurate tracking of expenses and keeping business credit history distinct from personal credit.
- Sync with Accounting Software: Check if the credit card you are considering will integrate seamlessly with your accounting application, making tracking and categorizing expenses even easier.
Create Separate Budgets:
- Develop Dual Budgets: Create separate budgets for both personal and business finances to maintain control and avoid overspending. This will help you manage resources effectively and plan for future growth.
Schedule Regular Financial Reviews:
- Keep Financial Check-Ups: Schedule regular reviews for both personal and business finances to ensure they remain separate and organized. Put them in your calendar and stick to these appointments as you would with any business meeting.
Consult with a Financial Advisor:
- Professional Guidance: Consider working with a financial advisor to establish effective financial practices and optimize your business’s financial health. They can provide personalized advice to enhance your financial management.
As I write this, it occurred to me that there’s one more benefit that I failed to mention in my previous post: keeping personal and business expenses separate gives you Peace Of Mind. You’ll feel more in control and confident about your business’s financial stability. With your business’s organized books.
Have you struggled with co-mingling expenses in the past? How did you tackle it? Share your experiences in the comments below! If you’d like to talk with me about how I might help you further, click the pink button to schedule a complimentary 20-minute call. Let’s Get Acquainted.
