Do you want to boost your business? Discover the 4 reasons to separate your business finances from your personal finances.

As a business owner, blurring the lines between business and pleasure is not a good idea. But as you navigate company finances, it’s tempting to use personal finances to help when your business needs a boost. This is generally not a good long-term solution, however.

Having separate business and personal accounts allows you to treat your company as the independent entity that it is. This protects your personal finances.

One of the most important aspects of running a successful business is keeping accurate records of your income and expenditure. This is the only way to improve the performance of your business. So keeping your business finances separate from your personal finances is crucial. In fact, serious complications can occur if you do the opposite.

Why is it essential to separate your business finances?

First: For tax reduction purposes

your company's finances

Separating personal and business finances can help you with your taxes, as it makes it easier to provide accurate records of your company’s finances. This will also help you when you are filing your taxes, especially business taxes.

If you pay business expenses using your business account, some of these expenses can help reduce the tax payable. Deductible business expenses include advertising costs, commercial rent, telephone, internet, website hosting, management software, etc.

In addition, there are business expenses that cannot reduce the amount of tax. These are called non-deductible business expenses. These include salaries, medical fees, donations, etc.

Keeping receipts and invoices can help you keep track of payments. And you can use your invoices and receipts to support your claims and obtain tax deductions. And the best way to do this is to use management software that allows you to record more efficiently. For example, the Dolibarr ERP&CRM software on the MentorSIG platform allows you to carry out these operations easily and efficiently, providing you with relevant information to better manage your expenses and, consequently, your business. Find out more here.

Second: For easier bookkeeping

Classifying income, expenses, assets

Classifying income, expenses, assets and receipts once they have been mixed together is time-consuming. You have to worry about the deadlines for filing your tax return. What’s more, mixing personal and business finances makes it difficult to keep track of your income and expenditure.

But maintaining a strong separation from the start will make it easier for you and eventually for your accountant. By using an integrated management system, such as Dolibarr ERP&CRM on the MentorSIG platform, your task becomes simpler and more automatic. You don’t need to have any accounting knowledge and you don’t need to make a big effort – the system takes care of all the company’s accounting automatically. If you need information on your company’s income or expenses for a given month, you can easily obtain this information in seconds. The Dolibarr ERP&CRM System on the MentorSIG platform allows you to adopt good practices and do things the right way, and facilitates the growth of your business.

Separating personal and business finances speeds up your tax return process. This also makes it easier for you to get a better view of your business’s cash flow. This is one of the great secrets.

Third: Improve your credit score

  Improve your credit score

Your business and personal credit can significantly affect each other. For example, some entrepreneurs take advantage of their strong personal credit score to finance operations or cover business expenses. Using personal loans to boost your business makes you responsible for any debt in your company.

If you take out too many personal loans for your business, you will run into financial problems. And this can negatively affect your credit score. Because for every additional loan, you’ll have another “hard bone” in your credit, and it will add up. Your credit score will be affected, which can affect your interest rates and your ability to obtain more credit in the future. And it can also affect your reputation.

A common tactic that some entrepreneurs use is to have a personal guarantee on the company’s first lines of credit. Once you’ve established your credibility as a business, you can focus solely on building your financial options through your business.

Fourth: For audit reasons

Have separate personal and business accounts

Having separate personal and business accounts can save time and headaches if the government eventually audits your company. Because if you have separate accounts for personal and business purposes, it’s easier to comply with the rules.

Remember, auditors examine supporting documents, tax returns, financial reports and much more. It will be easier

for you to provide the expenses related to your business if you keep personal and business finances separate. And it will be even more credible if your records are supported by integrated management software.

In addition, having separate accounts for your business and personal finances prevents you from using your business account to pay for personal expenses.

Do you want to boost your business?

boost your business

If you want to expand your business and need capital to do so, you may need to take out a business loan. But for that to happen, you have to show the bank or loan shark that you have a sustainable income. It is therefore vital to keep your personal and business finances separate. The bank or loan shark will only analyze your business credit, financial income and records.

That’s why the ideal solution for this journey is to opt for an ERP system – Integrated Management System. We strongly recommend an ERP system in the cloud, such as Dolibarr on the DoliSys platform.

An ERP system (Enterprise Resource Planning) is a set of functional management applications centralized in a single system that can be extremely beneficial for the profitability and sustainability of any company or business.

The advantages of an ERP&CRM system in the cloud are numerous, here are a few:

On the one hand, the ERP system in the cloud does not require ANY INSTALLATION on your machine, which will not only save you the complexity of the software installation procedures, but also the hardware infrastructure (servers, UPS, Router, etc.) that this type of solution requires. On the other hand, this solution relieves you of all maintenance costs, replacement of defective equipment, technical human resources, etc.

Thus, the Software – DoliSys (Software as a Service) platform allows you to manage your business from anywhere and from any terminal connected to the Internet (via an Internet browser) and without any headaches, concentrating your efforts on growing your business.

the DoliSys platform

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