A few things never go well together, like oil and water. Similarly, personal finances and your business funds cannot be mixed. If you keep clarity on these grounds, then it will be much easier to manage your financial worries.
Although, it’s difficult to put set our article into motion. How best to bifurcate the major differences between a personal loan and business finances. Let’s simplify through the ways as listed out.
- Prepare a concrete business plan
If you don’t have an established business, then it’s better to have a concrete plan ready. If you’re a novice in a starting a new venture, then it’s better to take help from a financial advisor/legal expert.
Starting a new project has its own set of advantages, like protect your personal assets against any possible exposure.
- Get a business card
Its recommended to get a debit or credit card so that your personal accounts are not exploited. This account will be exclusive to the business transactions. It’s extremely important to assume a fair demarcation.
Infact, a separate business card can also be taken. This will help build higher credit score, as long as the bills are timely paid. This is specifically done to upgrade your borrowing capacity, while qualifying easy for small business loans at reasonable interest rates.
- Assign a certain amount as salary
When your own boss, it’s good to assign yourself a certain sum of money as salary. Just act like an employee instead of an employer. If your business goes crashing into losses, then sit back and wait.
- Track all expenses
It’s best to draw a line from the start! Keep your business and personal uses separately. Keep the physical copies if possible. This is the best practice if ever scrutiny comes knocking, you’re prepared.
Keeping your business expenses separate can also benefit from the tax perspective.
Also this will help protect yourself by (1) keeping a clear financial record and (2) continuing the keep-the-receipts-separate discipline for improved business growth.
- Educate the staff including the owners
If as a business partner, you’re already aware of the differences between a business and personal expense. Then focus on spreading out the information to the entire staff including all the partners. Ensure that other people involved in your business have a similar level of awareness. Gather everyone and encourage participation, with commitment towards a common goal. Maintaining discipline is much easier if done together in a common group.
Although, a few effective ways to bifurcate business and personal finances have been underlined above. But you can focus on more such initiatives, to save yourself time and money at the time of ITR filing or when looking for business funds. A solid business venture starts with well-calculated, gradual improvements in the journey to upkeep all expenses, including personal and business finances bifurcation in the best way possible.
