8 Top Tips to Manage Business and Personal Finances Separately

Having two sets of finances to manage can become complicated. Good money management and organisation can help to keep your financial matters in order while increasing business profits and maintaining your budget. Finances are a key part of any business, but linking them too close to your finances can create problems or confusion further down the road. Whether you’re starting or looking to review your financial matters, here are some top tips for managing your business and personal finances separately. 

Keep Separate Records

No matter which method you choose for keeping financial records, they must be separated for your business and personal income and expenditure. Rather than recording everything on one spreadsheet or table, create two versions and dedicate one to your finances and the other to business.

There are many ways to keep good records for your business and its finances. Depending on the size of your business, you need to hire someone specifically responsible for bookkeeping and finance. 

Hire an Accountant

Enlisting the help of an accountant can make it much easier to manage your finances when running a business. Businesses in South Wales can find reputable Cardiff accountants like Hodge Bakshi to provide some assistance with bookkeeping, annual accounts, and business advice. Working with these accountants in Cardiff can help to keep business and personal expenses separate and better organised.

You can recruit an accountant to work for your company, but many small businesses find that the most cost-effective option is to contract an accountant when needed. Many businesses choose to use a firm of accountants to manage their monthly finances as well as distribute payments accordingly to staff members. 

Pay Yourself a Salary

This can help you to see your business and personal finances separately. It may be difficult to pay yourself a decent salary in the early stages of starting a business, but once your company is more established and profits have increased, it is usually easier to take a portion for yourself. 

Unless you have enough funds to cover your expenses for a few months while setting up the business, consider taking out a loan to help cover costs while you get your new venture off the ground.  

Initially, you should work out the minimum amount you can take to pay your expenses. As the business profits increase, you can increase the salary you pay yourself. Getting into this habit as early as possible can help you to keep your business finances separate. 

Set Up a Business Account

Don’t receive and spend money from your personal bank account on behalf of your business. Set up a business account to use specifically for the income and expenditure of your business.

Doing this will enable you to easily keep your finances separate from the business. It also means that when you’re taking time away from work, you won’t be tempted to get involved with any of the money management when checking your personal bank account. 

A business account will also offer different benefits and features to a personal account. There is often more flexibility tailored to your business so that you can overcome common financial issues more easily. 

Use Tools to Help Keep Track

Use tools and platforms to help manage your money. If you are using accountants in Cardiff to assist with the business, they may be able to provide systems and tools that will streamline your financial matters and provide key insights and data on your income and outgoings.  

There are apps you can download that help to manage your money too. You could choose to use this to manage only your expenses or create two versions to help manage your business finances too. 

To effectively manage business and personal finances, it’s essential to establish robust credit control management practices to significantly enhance your financial stability and business success.

Separate Your Receipts

Staying organised with your receipts can make it easier to maintain separation between personal and business finances. Keep the business receipts in a separate place from your receipts. Don’t be tempted to put everything in one pocket or bag and then sort them out later since this can be confusing and result in discrepancies. 

If you’re working with an accountant, it will also make it easier for them to see which expenses were on behalf of your business, and which were personal payments. Sometimes you may be asked to provide hard copies of receipts for tax purposes, so staying organised can avoid any problems in the future. 

Take Out Business Loans

If you need to borrow money to run your business, try to take out a business loan rather than a personal loan. Opting for personal loans means that the terms and conditions are catered towards an individual rather than a business. Loans borrowed on behalf of the business may also mean you are not liable to repay the loan under certain circumstances, which can make a huge difference if your business falls on hard times.

Prioritise paying off the debts of the business, as this can increase profits in the long run and keep the cost of running the company lower. 

Create Budgets

Setting budgets can help you to manage your money better. It can also help to separate your business expenses from your costs. Review your budget regularly to make sure you are not overspending. 

When creating a budget for your business, begin with the most important costs, such as office rent, business taxes, and any staffing costs. In the early stages of your business, it can be difficult to predict the monthly income, but over time you will find it easier to track the trends. 

Managing the finances of a business alongside your own can become complicated without good organisation and management. By following some key steps, you can separate your business and personal income and expenditure effectively. Working with an accountant, reviewing your budgets, and keeping separate accounts and records will all help in splitting your finances.