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

If you’re just beginning your journey in business, the temptation to operate using your own bank account, or perhaps put some money into your personal credit card, is a tempting one to give in to. We’ve all seen businesses funded in during the beginning using a credit card, or by the founder’s redrawing of their mortgage.

Over the long-term, however there are many benefits to be gained by maintaining your finances separate from your business’s finances. The rise of new sources of financing for small businesses has made it easier than ever to separate your finances.

Here are a few advantages of keeping your personal and personal finances distinct:

1. It can be more tax efficient

From a tax standpoint the combination of personal and business financial accounts can be a challenge.

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

There’s a risk of adding unnecessary compliance costs if you accountant has to split up the tax deductions and what’s not, so it’s important to keep records and receipts.

2. A better understanding of the business performance

The most important thing to consider when running any business successfully is identify if the business is making a true profit.

If you mix personal items with business it is often a false reading as to what the business’s performance is.

It is essential to take time to manage your businessand take a regular remove yourself from the daily routine to keep an the eye on profit and cash flow.

3. This is a chance to get your business up properly

You need to protect your family home from the wrath of creditors. You can do this through your company structure, like using family trusts or companies , which can have distinct ownership of your companies.

But you really need advice to make it work properly. Discuss with a lawyer accountant or financial advisor about the best way to create and protect equity. It could save you thousands at when you’re done.

Be sure to have the proper structure in place prior to you go into business.

When you’re just starting out in business, be sure to do your homework. This is a substantial investment. You don’t want to throw your money away because you wanted to save a few dollars at the start. Take a look at the most fundamental due diligence, financial, legal and the company itself.

4. Create your credit score

Separating personal finances from business finances and using it to grow your business will aid in building your company’s credit score.

This can help when negotiating with creditors, or when looking for additional capital to expand.

If you’re planning to buy an asset having a strong credit rating could be a benefit to you as you could take out loans at lower rates in the event of a need.

Get help

With new specialist alternative lenders that make it easier for small businesses to obtain finance Now is the perfect opportunity to think about how you can untangle your personal and professional financials.

We can guide your through this process, and advise on the best products and structure for your business and personal finances.