If your firm's startup capital was sourced from your personal savings, there's a good chance that you run all your funds through the same bank account. While there's nothing wrong with the first part, the latter could be your first step towards self-destructing. Without a separate business bank account, tactical money management will be impossible to achieve. And this isn't the only reason why you should implement a financial division.
Ever spent hours combing through your bank statements when filing your tax returns? This is often the result of mixing both personal and business funds in the same account. In such a case, it becomes hard to keep track of deductible expenses, which in turn creates the risk of inviting tax auditors. Such headaches are best prevented by splitting finances and proper book-keeping.
The need to split your finances extends to your professional image. Customers and suppliers have to feel confident about how you run your company for them to take you seriously. In other words, the lack of a proper boundary between the business and its owner will make others start doubting your professionalism. Fortunately, correcting this is as simple as setting up a dedicated business account.
If your company is registered as an LLC or a corporation, merging your accounts effectively negates the personal liability protection you sought under the law. Creditors will have easy access to your personal assets when looking to satisfy their claims. What's worse, courts will ignore your pleas when you turn to them for help.
Your ability to prove that your enterprise doesn't rely on your personal resources will be of utmost importance when applying for business loans. Lenders will also want to see your company's credit history, but this will be nonexistent if there's nothing to separate your personal and business income. You'll only have yourself to blame if this ends up limiting your borrowing power.
In an ideal scenario, a quick scan at your bank statements is all you'd need to figure out how your business is fairing at any time. This is easier said than done, but what's indisputable is the fact that it'd take at least a week to do the same if your finances are merged. Remember that it's your responsibility to spearhead decision making and maintain forward progress. Knowing that you don't have any personal transactions interfering with your accounts will not only make this easier, but also lessen the workload for your accounting department.
Even the most profitable venture will come tumbling down if its shareholders use it as their personal cash register. As you've probably guessed, this is more likely to happen when you and your company's lives are financially tangled. In such a case, chances are that you'll use your personal funds to bail out your company or vice versa. Either way, success will be hard to come by.
The idea of managing your cash in the same place as your firm's finances might sound convenient, but it's one that's littered with numerous pitfalls. Setting up a dedicated bank account for your business will be a step in the right direction as far as your success is concerned. While this means you'll have more accounts to keep track of, the long-term benefits of this move will more than make up for your efforts.
Ever spent hours combing through your bank statements when filing your tax returns? This is often the result of mixing both personal and business funds in the same account. In such a case, it becomes hard to keep track of deductible expenses, which in turn creates the risk of inviting tax auditors. Such headaches are best prevented by splitting finances and proper book-keeping.
The need to split your finances extends to your professional image. Customers and suppliers have to feel confident about how you run your company for them to take you seriously. In other words, the lack of a proper boundary between the business and its owner will make others start doubting your professionalism. Fortunately, correcting this is as simple as setting up a dedicated business account.
If your company is registered as an LLC or a corporation, merging your accounts effectively negates the personal liability protection you sought under the law. Creditors will have easy access to your personal assets when looking to satisfy their claims. What's worse, courts will ignore your pleas when you turn to them for help.
Your ability to prove that your enterprise doesn't rely on your personal resources will be of utmost importance when applying for business loans. Lenders will also want to see your company's credit history, but this will be nonexistent if there's nothing to separate your personal and business income. You'll only have yourself to blame if this ends up limiting your borrowing power.
In an ideal scenario, a quick scan at your bank statements is all you'd need to figure out how your business is fairing at any time. This is easier said than done, but what's indisputable is the fact that it'd take at least a week to do the same if your finances are merged. Remember that it's your responsibility to spearhead decision making and maintain forward progress. Knowing that you don't have any personal transactions interfering with your accounts will not only make this easier, but also lessen the workload for your accounting department.
Even the most profitable venture will come tumbling down if its shareholders use it as their personal cash register. As you've probably guessed, this is more likely to happen when you and your company's lives are financially tangled. In such a case, chances are that you'll use your personal funds to bail out your company or vice versa. Either way, success will be hard to come by.
The idea of managing your cash in the same place as your firm's finances might sound convenient, but it's one that's littered with numerous pitfalls. Setting up a dedicated bank account for your business will be a step in the right direction as far as your success is concerned. While this means you'll have more accounts to keep track of, the long-term benefits of this move will more than make up for your efforts.
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