When you own and operate your own home-based business, it can be tempting to just place all of your earnings into your regular bank account and use that same account to make all of your personal and business purchases. If this is your current business accounting strategy, it may be time to rethink things a bit and consider giving your business its own checking and savings accounts.
One major reason why it is important to have separate accounts for your business and personal funds is ease of record keeping. When you keep all of your money together, it can be hard to draw the line between business and personal expenses at tax time. If you have a separate checking account for your business, get a debit card for it and keep it in a special place in your wallet. Use it only for business purchases, and use it for all of your business purchases and what you will end up with is a bank statement that conveniently and accurately reflects all of your business expenditures in one place – no more sorting through boxes or envelopes of receipts. Also, while no one ever wants to think that the IRS is going to audit them, it can and does happen. If you have a separate business account, your business expenses are clearly stated in a credible way.
If you also get a savings account for your business, you can use it to set aside funds for things that you may be saving up for, such as additional equipment or other major purchases that you plan to make as your business grows. Keeping this money separate from your other funds not only keeps you from raiding your business savings (at least not without thinking about it first), it enables you to know when you have saved enough money to buy the things that you have been saving for.
These are just a couple of ways in which keeping separate accounts for business and personal funds can help home-based professionals simplify their financial lives. Businesses with organized finances are likely to be thriving in all aspects of their operations, making life a whole lot easier for the people who own and operate them. How are your business finances doing?