Starting your own business in Australia is an exhilarating experience. You get to set your own hours and build your business from scratch. However, getting caught up in the administrative tasks of being your own boss is not always easy. One of the biggest mistakes a new business owner can make is getting their personal and business funds mixed up.
It is imperative that you take the time to untangle these two worlds if you want your business to succeed. Having a clear divide between your personal and business bank accounts will give you total insight into your business finances. This guide will show you how you can achieve just that!
Why Having Separate Funds is Essential for Self-Employed Success
Using a single debit card for your morning coffee and a large software package purchase will result in a jumbled mess of bank statements. This makes it hard to get a clear picture of how profitable your business is. Having separate funds will give you a true picture of your business’s profitability. It will also make tax season much less stressful on you and your business.
According to the Australian Taxation Office, accurate records of deductible expenses are imperative for tax season. By having separate funds, you won’t have to dig through your personal grocery receipts looking for your office supply store receipts.
Setting Up Separate Banking and Credit Accounts
Having a clear picture of your business finances is the first step towards achieving your goals. This is why it is imperative that you open a special checking account just for your business. You should look for a bank that has low fees and is geared towards small business owners. You should then deposit all of your income directly into this account. Use this money to pay yourself by transferring a set salary directly into your personal bank account.
From here, open a special credit card just for your business. This will help you keep track of all of your expenses since they will automatically be marked as a business expense on your statement. You should then use your commercial checking account to pay off your credit card balance.
Effective Strategies for Tracking Your Expenses
While it’s a good thing to have separate accounts, it’s still important to have a system that can effectively monitor your expenses. One of the most efficient tools that can be used by a self-employed person to track expenses effectively is cloud-based accounting software. This can connect to your bank accounts and retrieve all your transactions. This way, it’s more efficient to look into your daily expenses in just a few clicks.
It’s a good practice to set aside a few minutes once a week to look into your overall cash flow. This way, any unusual expenses can be caught early on. If you accidentally use the wrong credit card to pay for a certain expense, it’s a good thing to reimburse it to the correct account as soon as possible and write a note to yourself to avoid making a similar mistake in the future.
Take Control of Your Financial Future
Separating your finances might look like a hassle at first glance. However, it’s a vital process that can lay a good groundwork for your business to prosper in the long run. This way, you can have a better grasp of your profitability and avoid a lot of frustration during tax season. It’s also a more professional way to establish your brand. It’s a good thing to start looking into banks like ING that offer services to self-employed Australians today. Your finances will be separated in a more efficient manner!