Here's why you need to keep your personal and business finances apart

If you’re just beginning your journey in business it’s easy to fall prey to operating out of your personal savings account in the bank, or bang some inventory on your personal credit card, is easy to be enticed by. We’ve all been told of companies that funded those early days by credit card, or by the founder’s redrawing their mortgage.

In the long run, however, there are big benefits to be gained by taking care to keep your private finances separate from your business’s financials. The rise of new sources of capital for small-sized businesses is making it simpler than ever before to separate your financials.

Here are a few benefits of keeping your business and personal finances separate:

1. It could be tax efficient.

From a tax viewpoint when it comes to tax, combining personal and business financial affairs can be tricky.

Taxes generally do not allow deductions for personal expenses. it’s only your business expenses.

It’s possible to add unnecessary compliance costs if your accountant is required to separate what’s tax deductible and what’s not. Therefore, it’s essential to keep receipts and documents.

2. A better understanding of the business performance

The key thing for running your own business is to identify if the business is actually making money.

When you mix your personal items with the business it usually gives you the wrong impression of how the business is doing.

It is essential to take time to manage your company, and frequently remove yourself from the daily routine to make sure you keep in mind both profits and cash flow.

3. It’s a great opportunity to set the business properly

It is essential to safeguard your home from the wrath of creditors. You can do it through your company structure, like using family trusts or companies , which can have separate ownership of your business entities.

But you really need advice to properly set up your equity. Talk to a lawyer, financial planner or accountant to discuss how you can structure and protect equity. This advice will save you several thousand dollars at the end of the day.

Get the structure right before you go into business.

When starting out in business, be sure to do your preparation. This is an investment of a large amount. It is not a good idea to dump your entire life savings away because you wanted to save a few dollars when you first started. Look at the fundamental due diligence as well as the legal, financial and the company itself.

4. Get your credit score up

Separating personal finance from your business’s finances and using it to build your business will also help in establishing your company’s credit score.

This is helpful when you’re negotiating with creditors or looking for additional capital to expand.

In the event that you’re purchasing an asset, having a strong credit rating could allow you to get a loan at a lower rate whenever the need arises.

Ask for advice

With the introduction of alternative lenders that specialize in which make it easier for small-sized companies to access financing This is the ideal time to explore how to untangle your personal and professional finances.

We are able to guide you through the process and provide advice on the most suitable products and structures for your business and personal finance.