The Golden Rule Of Bookkeeping
Welcome to our new series: Must-Know Best Practice Bookkeeping, where we share tips and insights for business owners who want to take control of their money!
In our first installment of this series, we are talking about the importance of keeping your personal and business transactions separate.
Must Know Best Practice Bookkeeping - Tip #1
Remember this Golden rule: Keep Personal and Private Transactions separate!
It sounds so simple, but take it from someone who manages many client files where personal expenses put through the business bank account. You can only imagine the things I see on a day-to-day basis! If this is you, I highly recommend, separating these transactions right now!
It doesn’t matter how big or small your business may be, setting your bank accounts up correctly from the start is imperative!
Not only does it make things so much easier come BAS and Tax time, it also keeps everything so clean and simple. Plus, your bookkeeper and accountant will thank you later (and you’ll spend less on any hourly fees).
Benefits include:
Taxation reasons – are you sneaking personal transactions in as business expenses? This can come back to haunt you!
It’s time-consuming. Separating personal and business expenses is super tedious for your bookkeeper, and their time = your money.
There will be fewer transaction disputes because it’s easier to spot non-business-related recurring transactions.
Inconsistencies can quickly throw out budgets and cash flow planning.
Debt – it’s so easy just to use business money, but are you paying your business back?
Planning to sell your business one day? Your records and balance sheet will look more professional, clean & credible for prospective buyers!
Alternatives to using your business account for personal expenses:
Pay yourself a salary, or increase your salary.
Get a business credit card, BUT ensure it’s paid down to $0 each month.
Set clear and realistic budgets.
Get advice from a professional.