Maintaining a healthy small business is at the best of times stressful. An all too common problem small business owners unwittingly perpetuate is mixing and matching business and personal transactions through a common bank account, which ends up being a nightmare when trying to re-construct and determine who is who in the zoo.
The following information could help keep your business finances in order:
Make a commitment: Commit to get your finances in order and be prepared to follow through.
Keep things separate: It can be tempting to use the business card to pay off all those personal bills that are long overdue. If things are to be done the right way, accounting transactions will have to be recorded, and before you know it, things are extremely complicated. No one needs that unwanted stress. Save yourself the time and money by keeping separate bank accounts for business and personal use.
Prepare a budget: Take control of your expenses and become aware of how much you spend. Why not review your previous year’s expenses and identify areas in which you should cut back, and those which should take priority.
Consider the workforce: Record all your labour costs. Evaluate wages, fringe benefits and overtime worked. Manage your costs by keeping track of how you pay others..
Call in the professional: It is tempting to cut corners where you can. An accountant has extensive knowledge of the tax laws that could benefit you. Accountants find deductions for SARS and keep you penalty free, which could save you time and money.
Why is it important to keep these entities separate?
1. Legal Protection
The advantages of setting up a company is the legal liability protection it affords you: courts consider the company as a separate entity from its members or shareholders. When a company gets sued, the party suing the company can’t sue you as an individual, unless of course you have personally guaranteed something. But once your personal and business finances are mingled, the court can go after the member or shareholder of the company because it looks like you and the company are one and the same thing.
2. Tax Advantages
Regardless of your business being run out of a home office, is strictly web-based, or is a “brick and mortar” office location, keeping a separate business account has its advantages. Whether you set up a company or partnership, maintaining a business bank account will help you avoid unnecessary hassles. SARS has strict rules for those who work from home about what can be deducted as business expenses. If you use your personal account for business use, SARS may frown upon those deductions, even if they are legitimate business expenses.
Being more organised can prevent things from becoming chaotic. We can help bring order to your business finances. Pay us a visit to see how we can help you.