3 Tips for Keeping Your Personal and Business Income Separate
It is essential to set boundaries as you run your own business. Not only are you giving yourself a chance to separate your work life from your personal life, but you are also segregating your business finances from your expenses. This is crucial as you wouldn’t want to accidentally use your capital, especially if you are just starting with your venture.
By knowing the limitations of your expenditures and company profits, you will not make any mistake of mixing up your finances. The following tips may just help you accomplish this efficiently:
1. Take Note of Your Receipts and Segregating Them
If you happen to run your own business, chances are you have your accountant to keep tabs on all the company expenses. They are also tasked to audit for a certain period to see that everything is in order. This is done to ensure that no profit is being used for something else other than the business.
Keeping the receipts will enable you to have a clear view of whether or not expenses are utilised correctly and that your personal expenditures aren’t getting mixed up with your business funds. Be sure to present these receipts to your bookkeeper, so they may add them to the equation whenever they are considering all the profits, losses, and investments.
2. Pay Yourself a Salary
This may seem like you are just patting yourself in the back, but what this does is set boundaries between you and your personal life. Yes, you are running your own business, and yes, your personal life and family benefit from it. Still, the amount of money you are receiving from it should be limited so that it only matches the average pay of a business owner.
Getting more than that will significantly affect the company’s budget, possibly causing a loss of investment or funds. Do not commit this mistake, as it makes you liable to embezzlement, especially if you happen to have a business partner as well.
3. Open a Separate Bank Account
You can effectively separate your funds from your business funds by opening a separate account. Not only will this prevent you from mistakenly spending company funds, but it will also give you a chance to manage your own budget at home.
Of course, your business account shall still be well accounted for, so be sure to declare it should an audit were to happen. If something comes up that compels you to declare your funds, make sure to do so—you’ve already ensured that your assets aren’t intertwined with the venture.
Segregation of both your personal income and business funds isn’t hard at all. By putting limitations in place, you will clarify which of your budget is intended for the household and which of it should be left for your business.
Setting boundaries will save you legally and financially, as it further proves that you are not misusing your venture’s money, and neither do you have any intention of doing it in the future. With a clean track record, a well-audited fund, and proper usage of your company’s money, you can be sure that your profit will always grow towards the future of your business.
If you need help tracking and managing your business income, the best accountants in Hillingdon are ready to assist. 1 to 1 Accountants is an accountancy firm based in the UK, and we primarily serve small businesses and freelancers. Reach out to us today!