Do you know that separating your personal from business finances has a great advantage? All the underlisted steps can help you create a separation, making it easier to manage the money coming into and going out of your business. And all these are practicable for your business.
1. Be a limited liability business
As a sole trader, there’s little/no distinction between you and your business — any company debts become your debts, putting personal assets (e.g. your house, and other assets) at risk.
Limited liability businesses are their own legal entity, separating what liability belongs to you (personally) and what doesn’t.
They can also pay dividends to their shareholders (i.e. you) from the profits made. All these are solid financial wins.
Making your business a limited liability company gives the impression of a fully-fledged, structured company. This credibility enhances clients’/investors’ confidence to work with your company.
2. Open a business bank account
Limited liability businesses are required by law to separate their personal and business finances. This serves as a visible separation, securing your business’s cash so that it is much easier to track your company expenses, claim tax credit and so on.
3. Pay yourself a salary
You shouldn’t forgo a steady income as the head of your company. By setting aside a specific salary sum, you:
· Safeguard your personal future (and consequently the business’s)
· Build a credible identity as “the boss”, which looks good to investors and banks
· Open a new cash pot to potentially be used for business growth
4. Use accounting software
One of the many benefits you get with online accounting platforms like BMAC Solutions is visibility into your projected incomings and expenses. This is especially helpful if you decide not to split your finances into separate bank accounts, because it helps you track how much of your balance is yours vs your business’s.
5. Set up a business budget
When there is no clear idea of your business’s financial limits, it’s very easy to overspend. So you should have an idea of your monthly, weekly and even daily budget. The more granular it is, the more likely you’ll stick to it and lessen the risk of having to pump personal finances into the company.
6. Working from home
There are many ways that working from home can really help, both for you personally and your business’s financial matters. Though it can get hard to manage any separation of funds when the line between personal and professional is blurred. If your home-working habits become slack, it affects your productivity, management approach and finances.
There are some easy ways to improve your working from home:
· Set schedules and daily routines
· Clearly separate your home and work spaces
· Create a professional environment
· Find ways to stay active and focused
8. Find a professional
If you don’t feel like you have the time to follow all of the steps above, you can contact us at ikOOba for your business set-up, finance and tax-advisory.