This is part of a series of the Top 10 Bookkeeping Mistakes Small Businesses make. To read the others, click here.
Running your own business affects your life as a whole – and it especially affects your finances, and your bookkeeping.
As a small business owner, it may feel almost impossible to separate your business and personal life. These days especially, with mobile phones and tablets and wi-fi everywhere, you likely feel (and are) constantly connected to your customers and prospects.
This can be a good thing in some ways – but when it comes to your bookkeeping, it can be a complete nightmare. Mixing your business and personal finances – bank accounts, transactions, receipts, records – makes life much more difficult.
You will eventually have to separate everything out when it comes tax return time – or pay your accountant to do it for you – and this can be extremely difficult and expensive. You know how hard it is to remember what you did last week, or which credit card you used for which expense; try thinking a year back. It’s nearly impossible. You’re adding stress, strain, and frustration to your bookkeeping that doesn’t have to be there.
Whether you are a new business startup, or have been going for some time, here are a few ways you can ensure that you are not making this bookkeeping mistake. Believe us, you will be thankful later!
Ensure you have a separate business bank account.
This is one of the easiest ways you can avoid mixing business amd personal transactions. Ideally, you want to set this up right from the start, but if you’ve confused your personal bank account with your business bank account, now is definitely the time to split out the business transactions into their own account.
Have (and use) a business credit or debit card.
Again a very simple solution – whenever you are paying for something, look at your credit cards and choose the appropriate one. If you can get a credit card that helps you gain points or frequent flyer miles or some other benefits, so much the better!
Review your books at least monthly.
The more often you review your books, the quicker you can catch any mistakes or mis-filings. Notice that your travel expenses seem high? Remove that flight to see the family for Thanksgiving. Seem to be spending a lot in technology? Catch that receipt for your son’s new smartphone. The other benefits of reviewing your books regularly is that you can …
Ensure you are paying yourself properly.
Definitely talk to us about this – depending on the type of business you have, the way you pay yourself can vary. Proper bookkeeping will mean that you are using the most tax-efficient way for you to get paid, and also the one that does not muddle the personal-business waters.
Set up business bookkeeping.
Ideally, hire someone to do the bookkeeping for you. We’ve discussed in a previous post that doing your own bookkeeping may not be saving you any money. This is another excellent way to ensure that business and personal finances are kept separate: you wouldn’t give personal receipts to your bookkeeper (or if you did, we’d be quick to point them out).
Use an online accounting system.
You can use desktop software to help with your bookkeeping, but an online system makes everything so much simpler. You can access your critical numbers from anywhere in the world, and it’s far easier to keep records of what’s business and what’s person. Read more about online systems here and look forward to having a much simpler business – and personal – life, as a result!
