Starting Business from Home: How to Separate Personal and Business Concerns
More and more people are getting comfortable working from home. Some would even start their business with no official location, using their address as the starting point for their transactions. But a startup could be complicated, especially when there are no clear boundaries between personal and business concerns. To start on the right foot, you must work hard to keep things neat and straightforward right from the start, particularly in aspects where money is involved. Early on, how you handle your finances could spell the difference between success and failure. And we are not even on the business framework yet.
It's easy to mix the two and not be aware you are making a mistake
It does not take too much effort to mix personal and business finances. But, unfortunately, that's why a lot of people are making a mistake too. For example, you may take part of your sales to pay for your expenses or vice versa; you may charge your business expense on your credit card. Over time, those practices could be detrimental to your personal and business lives. They could even have legal implications.
People who start a business from home find it easy to get lost along the way when there are no accountants keeping track of their finances. You must prioritise the best accounting practices early on with your business startup with the help of Central London accountants from gsmaccountants.co.uk. Getting such a back-office basic is critical to organise your business finances and protect your personal assets avoiding legal and tax problems in the future. That way, you can focus on more important tasks of growing your enterprise.
How to split personal and business finances?
So how can you not get too comfortable mixing personal and business finances?
- Keep separate bank and credit accounts. It will help you track your financial records if you do it that way. Plus, you can get tax deductions for your expenses in running your enterprise if you keep a clean, itemised record.
- Set up your business utility accounts under your company name. If you can, keep a separate office at home, albeit small. So you can pay for your operations with your business money.
- If you cannot have a separate structure to run your business, at least keep track of personal items you use for business purposes to be awarded tax deductions.
- File your receipts neatly. Close monitoring of the money coming in and out of the business is key to maintaining a sound financial record. Keep everything documented so you will not have a hard time keeping up with the requirements come tax season.
- Pay yourself a salary. It would be difficult if you are not getting any from your business to spend on your personal needs. It is often the cause of crossing boundaries, spending business money mindlessly.
Never use personal and business funds interchangeably, even if you are running your business from home. It will save you lots of headaches if you keep them and spend them separately.
