If you are a sole trader or a small business owner, you understand how easy it is to get the personal finances tangled up with your business. Keeping the things separate helps you to lower problems and simplifies things and it makes it easier to handle your finances.
Here we’ll follow the tips provided by Bookkeepers in Melbourne and how it can influence your small business tax and keep your business and private finances separate.

 Why there is a need to separate your personal and small business tax?

  1. Save money and time

You may ask any finance and small business tax expert and they’ll tell you that one of the most useful things you may do while commencing a business is keeping your business finances separate from personal arrangements.
It will help you save money at the end of the next financial year, or when it is time for that audit that is overdue and general organization of finances. If you don’t keep the business and personal finances separate, you run the risk of giving yourself a hard time tracking your expenses.
If you are not doing your accounting, having a joint account may cost you more in accounting fees as the accountant will need more time to untangle the mess and complete the tasks.

  1. Business tracking

If your weekly family groceries and brand new office purchase are recorded on the same bank statement, it becomes difficult to see where the money is going.  Separate accounts save time and money and also make tracking of expenses much easier.
As your business bank account records your income and expenses of the business, the personal account remains for all else: purchasing pet food for the family dog or family holidays.
There is another advantage of having personal and small business accounts- it makes it obvious if the expenses are becoming greater than the income that allows you to take action before you are in financial trouble.

  1. Accounting becomes easier

Separation of personal and business accounts prevents you from claiming for personal expenses. If the ATO requests additional information, it becomes easier and useful to be able to refer to business bank accounts.
If you intend to keep everything in a similar bank account, you might have to explain and justify individual expanses. They might be looking at your transactions in detail. You’ll have to decide whether you must keep business and private finances separate.

How to separate your personal and small business tax?

  1. Open a separate business account

One of the most straightforward methods that we advocate for in the separation of personal and business finances is opening a separate business account. You will attain peace of mind that all the transactions made are related to your business and are deductible.
If you intend to be organized, having distinct bank accounts can assist you to avoid any bad surprises at tax time. Make use of one account for your regular business transactions and link your business credit or debit cards to that account. Use the second account as your business savings account and keep aside some money for your income tax and GST liabilities.

  1. Keep separate boxes for the receipts

If you make cash payments in both business and personal life, you must have two separate locations to store personal receipts and business receipts.
It’s a recommendation by small business bookkeeping services providers to prioritize your business receipts. Tax auditors are more concerned about your business expenses. Therefore, keeping the receipts organized will make your life much easier during the tax season.

  1. Set a budget for your business

It is common for small business owners to borrow money from personal accounts to assist their business during tough times. Sometimes it is really hard to avoid. But there are some ways around it. Setting a clear budget that is based on your business requirements and current income can assist you to avoid constant borrowing and lending money from other accounts.

  1. Bring a finance professional

Our bookkeeping services for small business providers understand accounting inside out. It includes sorting the receipts and organizing income and expenses whether business and personal finances have been kept apart or not. We know that it is not a strong point for everyone and all want to spend their afternoons picking through boxes of receipts.
If you intend to decrease the bookkeeping responsibilities from your shoulders, call the professionals from Reliable Bookkeeping services. Our team is here to help you establish smart systems to make your bookkeeping requirements much simpler. If you have not separated your records into personal and business stacks, it is never too late to start.

Just give us a call!

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