How to Separate Personal and Business Expenses

Mixing personal and business finances is one of the most common mistakes I see with small businesses. The mess it cost can be catastrophic at tax time, or even when your company goes to apply for a loan of sorts.

This may be you and you are not sure how to make things work out correctly or even how to take a step in the right direction. Here are a few tips to help you get started.

Create a Business Checking Account

This should be your first step when starting a new business, and you should get into the habit of depositing income here and paying bills from this account as well. If there is ever any question as to whether you are running a hobby or a business, the IRS will first look to see if you’ve opened a separate account, which will help them decide whether to grant you that all-important distinction, so you want to make things as simple and clear as possible for yourself from the beginning.

Open a Business Credit Card

If you are a new business owner, it can be difficult to get approved for a credit card, but apply anyways, it’s no use wondering “if”. And if you get denied, continue apply especially as your business grows. Little secret about doing this is that business credit cards are the only credit cards on which interest accrued is deductible as a business expense.

Pay Yourself a Salary

Writing a check from your business checking account to yourself for the same amount each month will help you maintain a sustainable business budget. It can be easy to let money slide around between personal and business accounts but paying yourself a set salary will help maintain the necessary boundaries.

Maintaining clear lines between your business and personal expenses doesn’t need to be challenging. Setting up a clear distinction between your personal and business finances, and consistently keeping them separate, is fundamental to your success. If you are a new business owner, start things right from the outset. If you have been in business a while, take a day or two to get things set up for the long haul. It will save you tons of headache and make it easier for you to become successful in your business.

Now that you have a starting point, let’s get going!

Share below other ways that you may find helpful in separating your personal from business expenses.

To Your Success!

Cash Flow Statements and Accounting Applications

Cash flow statements are one of the four financial statements prepared by the management at the end of the financial year in accordance with the accounting standards. It is concerned with the inflow and outflow of cash in a given time period from operating activities, investing activities and financing activities (not necessarily in the mentioned order). That means it is based on a cash basis of accounting as opposed to accrual basis used in the balance sheet and profit and loss statement. It shows a picture of the ability of the company to pay expenses including payroll and interests. A strong statement is required by investors if they are to make a decision when it comes to investing in business. In addition, for the business to invest for expansion, it has to study the statement.

Of course, the management needs to know the result of operating the business and whether the current projects are feasible or not. In addition, being in profit may not lead to sustainability of the business if its incomings are not able to cover immediate expenses or meet immediate current liabilities. It is of no use if the business has not enough cash to pay its employees but its accrued income – and thereby its profit is high.

As per Generally Accepted Principles of Accounting (GAAP), cash flow statements can be prepared in two ways: direct and indirect. The latter mode is deemed appropriate because it shows the relation between net income and cash from operations. Moreover, it starts with accrual method’s net profit (or loss) and proceeds further. The former mode, on the other hand, presents a summary the cash flows from various activities only.

Despite the name, non-cash items including leasing to purchase an asset, conversion of debt to equity, exchange of non-cash asset, liabilities for similar non-cash assets, or liabilities, and issuance of share in exchange for assets should also be recorded. This can be done as a note or within the statement itself, as the management deems suitable. Also disclosed in the notes are any significant noncash transactions like depreciation, amortization or impairment loss.

Accounting applications help in making accurate information to be presented in cash flow statements. Direct method or indirect method, applications are capable of preparing precisely – after all, it comes from the journal entry that is made in the initial stages of accounting, and the app makes sure of it – what the management wants. The management can see the flow of cash at any period of time in the fiscal year. In addition, because its data is linked with the “cash” part in the balance sheet, having accurate figure helps a lot. Moreover, there is also the feature of security, an authenticity that comes with the apps.

This valuable advices about online accounting applications shared by Accment for accountant or non-accountant firm. Accment provides online bookkeeping document management, inventory management, payroll hours, day journal applications too.

A Few Points You Have To Consider Before Hiring An Accountant

If you are tired of handling your finances by yourself, then this is the best time to hire an accountant who would overlook all your financial statements.

What does an accountant do?

An Accountant keeps a record of all the daily financial inflows and outflows and does an auditing of the same on a regular basis. They are responsible for maintaining the financial statements of the company that is required for paying tax, preparing annual financial statements and so on. Accountants also offer an assortment of information regarding tax laws, investments and yearly assessments, and also taking care of the financial records so that there is no wastage of finance or resources in the company.

Before you hire an accountant, there are some things to consider. Check out these qualities before hiring a good accountant for your company.

Experience counts

A good accountant should be well experienced and should have varied experience in a good chartered accounting firm. Always find an accountant who has good knowledge about finance and accounting. Do not hire an amateur as your business may be at stake if the accountant is entirely new. It is also important that the person has qualified from a good institute.

Is popular in the market

Always choose an accountant who is well reputed and famous in the market. Modern controllers usually do their job well, and that is the reason they are so popular. You can sit back and relax by handing over your financial statements to them, and they would guide you in the right way regarding investments and handling of finances. Also, ensure that they have real testimonials from other clients whom they have worked for.

Affordable

Though it ‘s hard to get an excellent accountant at a lower price, ensure that the controller you are hiring is accessible. A good accountant who charges an affordable rate will also help you to save money in the long run. Look for someone who would provide quality services at affordable prices. You can search for a large number of accountants who are pretty reasonable.

Dependable and trustworthy

A good accountant needs to be trustworthy and reliable, and he would be dealing with your finances. You just cannot give your finances to someone who you feel is a hoax. He also needs to be dependable so that you can discuss your financial matters with him transparently. Also, ensure that the accountant is polite as you would be working with him on a long-term basis and you need to have a cordial relation with him.

These are the few qualities that you must look for while hiring an accountant as he would be working with you for a long time and would be answerable to you as well.

Jayson Fox is one of the passionate accountants in London who enjoys writing on varied subjects like accountancy, accountancy firms etc. If you want to know more information on this regards then visit Truedynamic.

A Guide To Opening A Business Bank Account

Whether you will be starting a small or large venture, one of the important tasks that you have you do is to set up a business bank account. Although you may think this is just an additional task that will eat up your time and may even be unnecessary (since you have a personal account you can use), having a business bank account can be really advantageous, especially for your start-up company.

One of the important reasons why your company should have its own account is that even if your venture is a sole proprietorship, an official business bank account makes it easier for you to keep your business expenses separate from your personal ones. Also, having a separate account will make it easier for you (or your accountant) to compute and pay the necessary taxes for your business. Lastly, a business bank account can help make your company look more like a genuine, professional business as opposed to a small and possibly untrustworthy operation.

If it’s your first time to open a business bank account, below is a guide and some helpful tips that can help you with the whole process:

1. Be on the lookout for any specials or promos offered by banks, both local and commercial ones. There are many banks today that offer cash bonuses, fee-free credit card transactions, and other incentives to attract new business customers. Take advantage of these offers so that you’ll gain greater flexibility and save more money that you can use to invest in the operation of your business.

2. If you already have a personal checking and savings account, visit your bank. Ask the representatives about the business bank accounts they offer. You may be able to get a better deal by keeping both your personal and business accounts at the same bank

3. Ask the bank representative for a rate sheet that shows the current interest rate on business checking and savings accounts. If you plan on keeping a huge balance in your business bank account, earning some interest will be a really nice perk.

4. Select a business account that meets your requirements. Choose an account that won’t charge you maintenance fees or per-check charges. In addition, make sure that you will be able to meet the minimum balance requirement to avoid incurring service charges.

5. Once you have opened your business bank account, wait a few days for the funds to settle in your new account. Check the balance to be sure that your initial deposit has been credited. Get in touch with the bank if there are any discrepancies with the initial deposit or if you have not received any account paperwork within a week of opening the account.

Why QuickBooks Hosting Is the Smart Way to Do Accounting

The accounting profession is usually slower to catch on the rapid changes in technology as many other industries. So many accounting firms are yet to wake up to the tremendous opportunities offered by cloud accounting.

Indeed, there is a lot of debate in accounting firms on whether to stick to the desktop version of QuickBooks or to go for QuickBooks hosting, which is the new way of accounting. QuickBooks hosting creates a better and more conducive accounting environment, and saves the frustration of having to deal with the complex IT issues that crop up – which have nothing to do with the core responsibilities of an accountant.

Let’s talk about why QuickBooks hosting is the way of the future and is indeed the smart way to do accounting.

With QuickBooks Hosting, you don’t have to be restricted by geography – With the traditional desktop version of QuickBooks; you are essentially stuck to your computer. If there is any work that needs to be done, you or your staff will have no choice but to return to their computer in the office cubicle. When you have a hosted QuickBooks solution, your data is hosted on a remote server. There will be a centralized database that holds all the data and can be accessed on any number of devices, no matter where you are located. Your team can collaborate jointly on the data from several different locations in the world, even when they are hundreds of miles apart.

QuickBooks Hosting offers an enhanced data security and protects you against data loss – The problem with using a desktop version of QuickBooks, or for that matter any software is that, your data is held in a single computer in the office. There is always a possibility of someone breaking into your system and getting access to the data. Also, there is always a chance of your data getting lost in case of a system failure or a breakdown of the IT infrastructure. With QuickBooks Hosting, your data is encrypted and stored in a remote server in secure, top-of-the-line data centers. Your data is backed up daily and stored in multiple locations around the world to protect you against data loss in the event of a natural disaster or a rare system failure.

With QuickBooks Hosting, you are assured of faster data recovery – It is not uncommon for computers to crash when you are working on a critical piece of data. Now, with the traditional desktop version of QuickBooks, it is practically impossible to recover the data in an updated state. But with Quickbooks Hosting, since the data is stored in real-time on multiple servers located in different locations in the world, you will be able to recover the data easily and resume your work. You will not suffer any delay or inconvenience of any sort. Certainly, this is the smart way to do accounting.

Wrap Up

QuickBooks Hosting saves time and money, it ensures maximum data protection and security and allows for a faster data recover. It offers a solution for your most complex accounting needs and helps you serve your clients better. It is indeed the smart way to do accounting.