One significant challenge that small business owners experience is the ability to separate their personal and business assets. The mix-up leads to business instability and can affect the general operations or even stall the growth of a business. Here are six ways to double-check and ensure that you do not mix your business and personal assets.
Get a Credit Card for Your Business
If you own a business credit card, you will avoid running business transactions using a personal account. Your company expenses will be on a dedicated card, enabling you to draw a clear line between personal and business expenses.
It also creates a seamless experience when tracking expenses, thus, helping you make informed decisions when creating a budget. You will no longer mix up personal and business expenses, allowing you to effectively control your spending and build your credit score in the long run.
Open a Business Account
You need to open a business bank account strictly for your business transaction for effective double-checking of personal and business assets. It gives you a clear picture of your business expenditures, making account auditing easy.
You can review your bank statements and determine how you spend the business money. If there are discrepancies, you can quickly double-check using the bank statement and know where you might have gone wrong. It also makes bookkeeping easy, especially during the tax season, creating a seamless experience for the accountant.
Get an Employer Identification Number
One of the main ways to avoid mixing up personal and business finances and keeping track of every activity is by applying for an employer identification number.
When you own an EIN, you will no longer need to use your social security number in your business. You will draw a clear line between personal and business assets and avoid mixing up assets.
Keep Business and Personal Receipts Separate
It is best to store all receipts for personal and business expenses separately. This makes work easier during reconciliation and business audits. Your accountant will avoid mixing up the receipts, thus, getting the actual expenses figures for both accounts.
Therefore, get separate folders for personal and business receipts and file them accordingly. For effective results, you can keep personal receipts at home and business receipts in your office.
Track Shared Expenses
Make it a habit of separating personal and business expenses every time you spend money or use an asset. For instance, when going to the gym, you should use a personal car and fuel it from a personal account.
If you use a personal car and spend business money on fuel and other related expenses, it may not be easy to track your expenses, especially when you lack proper records. This can drain your business in the long run if you continue using business assets for personal expenses.
Therefore, keep track of all expenses by filing the receipts, ensuring you have a clear financial record without living out anything.
Educate Your Employees
Sometimes, you may not be present all the time to monitor or oversee business operations. This is why it is imperative to educate your employees on monitoring and double-checking personal and business assets. Let your employees know the difference and the consequences of mixing up assets.
You will have peace of mind wherever you are because you know you have a responsible team. Remember always to monitor your accounts when you’re back to ensure no mix-up of assets.
The Bottom Line
Using the tips above can help you double-check personal and business assets and avoid confusion that can stall business operations and continuity. Take your time and analyze each step and operate your business seamlessly.