Bookkeeping can be tedious for any small business, but if your business doesn’t keep accurate books it can make your cashflow a nightmare, not to mention tax time. By implementing some simple strategies, you can create a clear cut process and get a better grip on your financial situation, even increase your earnings.
Separate your personal expenses from your small business
Having partnered with many small businesses over the years we have seen many business owners treat their business bank account as their personal spending account. This makes it very difficult to track your business cashflow, and makes bookkeeping double the job.
In order to gain a clear picture of your business cashflow; firstly separate your personal expenses and spending from your business.
Here are a few tips to make things a little clearer.
1.Personal & Business Bank Accounts:
If you haven’t already, set up a personal and a business bank account. For ease of transactions, go with the same bank for both accounts.
2.Calculate your Personal Budget:
Do a quick calculation of what your personal spending is each week. Include all your living expenses (home loan or rent, utilities, memberships, entertainment etc). You can do this in a very in-depth budget spreadsheet or really quickly with a scrap piece of paper – you can always come back and adjust it later if you need to.
3.Set up a regular drawing or wage payment:
Now that you know how much you need to live on, set up a regular payment from your business bank account to your personal account. (Whether you set this up as a drawing or a wage will depend on how your business is legally structured, so please gain individual advice on this).
4.Use the Appropriate Account:
Now that you will have money regularly in your personal account, use this account for all your personal spending and keep your business account for business use only. If you find this amount is too much or not enough, you can adjust it as you go. But make lump sum transfers rather than paying for personal items with your business account.
Having these accounts separate makes it really clear when you have you books up to date, as to how your business is tracking. It also makes it much quicker, and much more cost effective at tax time.
Wishing you all the best with your business success.
P.S. Good small business bookkeeping and positive cashflow is just about creating habits, so get started today!
Please leave us a comment, and ask any questions you have about your small business bookkeeping and cashflow challenges. We are always happy to help.