Walking the line between personal and business expenditure can be difficult for some. It is, however, a necessity if you don’t want to run into complications in the future. For instance, drawing a distinct line between personal and business expenses allows you to clearly see what you shouldn’t and shouldn’t be able to deduct in terms of taxes. Business growth can also be tracked more straightforwardly. If the time ever comes, selling your company will also become much more manageable.
If you haven’t yet begun doing this or have no idea how to, don’t worry. This article details exactly what to do to start making your prudent financial decisions:
1. Set up separate checking accounts
With separate checking accounts for your business and personal expenditures, all you have to do is be meticulous about drawing money from the right accounts whenever it comes time to do so. Doing your taxes is as simple as checking your bank statements for a clear idea of how much you’ve spent over the year and for what reason. Once you have clear bank statements, you can use them for your financial reporting and even your taxes. It’s also important to note that you should stick with using your business debit card and not cash for this to work.
2. Give yourself a salary
Your boss is the person who writes you your pay check. When you run your own company, technically, that person is you. Give yourself a salary to make it official. You can transfer this money to your personal account and use it as you would a proper salary. Don’t allow yourself to touch your business account, even when things get dicey budget-wise. As far as you’re concerned, your business account is a different entity separate from you; taking from it would be the same as taking from your employer – impossible!
3. Budget yourself
No business owner wants to take money out of their business account if they can’t afford to, but the opposite is true as well. Unfortunately, pulling money out of personal accounts to fund business ventures is more commonplace than you’d think. A lot of the time, it’s just what you have to do to keep your company afloat. To prevent this fate, transparent and rigorous planning
and budgeting based on your earnings is necessary.
4. Make clear distinctions
One of the biggest challenges when keeping your business and personal expenditures separate is determining what falls under each category. This difficulty is often exacerbated by the greyer areas in business, such as entertainment, food, and travel expenses. It’s understandable to want to allocate as much of them as you can under business expenditures. After all, it makes it all the easier for you to write it off as a tax deduction. But there is a clear line between personal and business funds, and having the foresight and discipline to deem it so is essential to your long-term financial success.
These tips may not be easy to follow at first, but with consistency and determination, you’ll be able to keep your expenditures separate with little to no difficulties. This will make it infinitely more straightforward for you when your taxes are due or if you’re looking for further financing. A good, healthy business grows steadily with each prudent financial decision made. Don’t hesitate to start now.
But if you still feel wrong-footed and need additional guidance, Express Corporate Services is an accounting firm in Singapore
that provides unparalleled business advisory services. We want your business to thrive and will work tirelessly to ensure that you have the inside knowledge and expertise to take it to new heights. Contact us today to find out more!