If you are self employed, keeping your business and personal finances could help add clarity to your finances, as well as save money when tax time come in not just accounting fees but also help make sure that you record all your tax allowable expenses. Here are three simple ways you could implement to keep your personal and business finances separate:
1 Open a Business Bank Account
If you are just starting out as a sole trader using your personal bank account to receive or make payments is the simplest way to get up and running. However as you establish yourself it will make sense to open up a dedicated bank account for your business transactions. It will add credibility for your customers and avoids you needing to use your personal money to make business payments. It not only makes it easier for your accountant/bookkeeper to prepare your accounts and tax return saving them time and reducing your bill, but also meets the guidance issued by HMRC to keep personal and business money separate.
2 Get a Business Credit Card
If you are regularly using your personal money for business expenses, you can approach your business bank manager to find out if you are eligible to apply for a business credit card. You avoid the need to claim expenses each month and your monthly credit card payment is taken out of your business bank account, so that’s one less thing to worry about.
3 Pay Yourself a Salary
It is so tempting to dip into a business bank account especially when a customer has paid you a nice big fee. However, the business has its own liabilities to pay such as suppliers, corporation tax and VAT. Paying yourself a fixed amount not only means you can assess the true profitability of your business, prepare budgets and help with pricing but will also help you organise your personal finances.
Separating your personal and business finances is another job on your to do list but the effort will add credibility and reduce time for your accountant or bookkeeper resulting in cost savings.