Managing finance seem easier when you start a business on your own and have a single account to keep track of your personal and business finances. Initially you might be tempted to maintain a single account since it may save lot of time and you can focus more on business management and deliverables. I can hear you saying, “After all, these are my accounts and I own my business – So why take the trouble of creating and maintaining different accounts?”. Well, this article is written just for you. After reading this article fully, you will understand how you can have a hassle free life by managing personal finance and business finance separately.
Hassle free record keeping and tax filing:
Imagine separating your personal and business income and expenses at the end of April, when you need to focus more on expanding your business. If something goes wrong with the accounts, and you provide inaccurate information to your tax officials, you might end up facing serious consequences. Foremost benefit from managing personal finance and business finance separately is having a clear picture of your income and expenses. You can also obtain the best possible tax benefits.
If you need a business loan to expand your business or to start a new one, you have to show your finances to banks or other financial agencies. Chances of your loan rejection is higher when you have accounts mingling in your finances. Officials may consider this a disorganized business, or you are not interested enough conducting business. You may want to avoid facing such a situation by managing your personal finance and business separately, especially in this period when the economy is down and banks are considering strict rules and regulations for approving loans.
Credit card benefits:
If you are a small business owner working from your own home, chances are higher for you to manage your personal and business expenses by using a single credit card. When you file your taxes, officials might think that an expense that was shown as personal could possibly have been for business purposes. For example, buying computers, printers and software for your personal use can be considered as office expenses. It is advised to manage personal finance and business finance separately by using different credit cards to make purchases to avoid problems with the IRS.
Documentation and business growth:
When you have two separate accounts for managing your business finance and personal finance separately, documentation becomes easier. It is very important you document every transaction that you make. This habit not only saves you from tax filing hassles, but also helps you analyze your profit – loss, income-expense ratio to make necessary changes / improvements to your business.
If you feel it is tough to manage personal finance and business finance separately, employing a bookkeeper or an auditor is advisable. There are Finance Management software available online or as an open source tools. You can download open source finance software to manage your finances. Be careful while using online portals, and ensure you have enough security on your account information.