One of the most common mistakes new business owners make, is not hiring a bookkeeper from the start. An experienced bookkeeper can act as the backbone of your company, they have the knowledge and expertise you need to manage finances, run payroll, create strategies, track expenses and measure growth.
When business owners go home for the day the stress of work follows. By learning to separate business and personal expenses, you will notice a reduction of stress. If you’re currently experiencing a problem with your business finances, making necessary adjustments will not only help your business, it will also help you maintain a better quality of life.
Reasons You Should Never Mix Business and Personal Expenses
1. Bookkeeping becomes more difficult.
By mixing personal and business expenses it will cost your bookkeeper more time and your wallet more money.
2. Tax preparation will be time consuming and more costly.
The chance of errors in your financial documents is much higher when you have expenses that do not qualify toward your business.
3. Errors in appropriation of Funds Can Lead To IRS Audit.
IRS audits increase stress and could potentially cost you a lot of money. If you’re audited by the IRS you’ll have to come up with legitimate proof of expenses such as receipts and invoices.
How Can I Start Keeping My Business and Personal Expenses Separate?
- Open a business checking account.
- Apply for business credit card.
- Pay yourself a salary or distribution of income, if appropriate.
“Once you have established separate accounts it is vital you commit to properly separating transactions.”
Helpful Tips For Organizing Expenses
- Integrate bookkeeping tools that organize and track expenses.
- Keep track of shared expenses: If you’re at the store purchasing office supplies as well as products for your home, request a separate receipt or make two separate payments, one from your personal the other from your business account.
- Construct a business expense check list to remind you which items qualify.
- If you have employees who make business purchases, instruct them on how to track expenses.
- If you’re saving receipts, make two separate files one for business the other for personal.
- Hire a bookkeeping consultant to assist with organization and strategy.