As a business owner, it is crucial to remember that your company is an independent entity. Your business is more than a hobby, therefore it has to stand free from you and your personal finances. Separating your finances shows that you are serious about your business in the long run.
Unfortunately, many entrepreneurs run both their personal and business-related transactions through the same bank account, which is typically an individual savings account.
Advantages of keeping your accounts separate
It looks good
The importance of separating your personal and business finances also comes down to your professional image. Having two separate accounts rather than using the same for both business and private purposes makes you look more serious, including helping to establish your business identity.
It makes it easier to secure funding
The ability to obtain working capital for your business is vital to grow it, and business credit will be mandatory to secure larger business loans. Having your personal and business income blended together makes it more difficult to provide your business income to banks and credit ratings agencies, therefore making it more difficult to establish your business credit.
It helps you take advantage of tax deductions
The ability to take advantage of tax deductions, including writing off business expenses, is a huge reason many business owners choose to split their personal and business finances.
Of course, there is no way you are not going to take out money from your business to meet personal needs, after all that is why you’re in business in the first place. But you need to put a structure around it so that it is not done indiscriminately.
Cultivating financial discipline is critical to your success as an entrepreneur. It is pointless maintaining a corporate bank account for your business if you are still going to dip into it from time to time to meet your personal needs.
Keeping accurate records of personal and business expenses is vital when running a business, as this will not only help save time but a significant amount of stress as well.