“Being a business owner isn’t an easy task” — a line, well known and well understood by all entrepreneurs. Innovation and Entrepreneurship is a path always served with thorns and horns.
As a budding entrepreneur or professional, it’s quite common that you might tangle up your personal finances with your professional finances. No matter what your business type is, keeping your personal and professional finances separate is an art you need to master.
So, how can achieve this art is what we are discussing today.
- Start with a thorough discussion round with a Financial Expert
One of the biggest challenges when starting a new business is to ensure you have enough money to tackle your financial challenges in your initial months. With an inadequate financial strategy, you will have difficulty building your foundation and earning realistic revenues. You may wonder about the need for financial experts or financial advisors with your money.
Financial experts are your planning partners in monetary terms. They are licensed and skilled professionals who ensure you with the right business strategy planning. They help you decide the amounts of money you could save, the number of accounts you can/need to make, types of long-term and short-term insurances you must leverage correct tax planning, and many more. Overall, they help you understand what or how you can meet your future goals.
- Select your Profit Margin
You don’t want your organisational performance to fall into pieces. You don’t want to pull out more money from your business than it has to offer you. We have seen many small companies pumping out their personal savings to incur losses and bankruptcy. Planning upon your profit margin helps you, as a business owner, assess your total sales figure out any losses or business expenses. Overall, your net profit margin shows how or where your business’s revenue flows.
Therefore, as you become a master in entrepreneurship and innovation, you get to keep a clear idea of your business’s budget and expenses. You gradually get a structured strategy to differentiate your professional and personal finances with a clear viewpoint.
- Opening a Business Bank Account
The key to running your business is financial stability. You need a bank account that will help you meet those needs and keep up with the growing pains of entrepreneurship. When you open a business bank account, make sure you consider what your company needs and wants from its financial services provider. After discussing the options with an expert in this field, a professional will guide what bank account will be an apt choice for your business and improve organisational performances.
If you get your business registered, you simply need to let the bank use your EIN (Employer Identification Number) to open an account.
- Business Credit Cards are Useful
From starting your entrepreneurial journey to becoming a master in entrepreneurship and innovation, you must have understood the value of a credit card. Maybe not in the initial days, but a business credit card solves your business expenses as you grow your organisation. Credit cards help business owners and entrepreneurs access funds and manage businesses efficiently.
You can apply your credit card for business purposes only with a social security number or an EIN. Since these cards are not open for personal use, you simply have a plus point in separating your professional and personal finances.
- Applying for an EIN (Employer Identification Number)
When it comes to business and personal finances, the first step is getting an EIN. An employer identification number (EIN) can be assigned by IRS, which you’ll use when filing your company’s income tax return or payrolls.
Using an EIN is the best way to keep your personal finances separate from your business. While this doesn’t necessarily mean you can stop working with Social Security Number (SSN), it provides a line that may help protect against identity theft when dealing solely with tax documents such as 1099 MISC forms or W2s year-end.
The next time you start a business, don’t forget to get an EIN. This will help prevent any confusion between your personal and professional finances.
- Paying Salary to Yourself
Paying yourself a salary from your business is a great way to separate work and home life. By transferring money over once or twice per month, you can maintain an even cash flow within both accounts without disrupting the harmony that already exists there.
Professional business coaches in Malaysia from EMS Global always guide their clients to officially take a salary for themselves, making it easier for them to determine their organisational profits.
- Differentiate your Personal and Professional Receipts
You should keep your business and personal receipts separate to be audited separately. If you don’t do this, the IRS will audit both of those accounts together, leading to problems if either one is looked at closely by an authority like taxes or regulatory agencies. Whatever system is being used should have two physically separate locations for these documents.
Always make sure that your finances are split up into two separate categories — one for business receipts and another solely dedicated to personal data. This will allow you to maintain control of both sets and prevent any mix-ups or confusion about which set goes where when it’s time for tax filings.
When it’s about business and finance, the leading factor in maintaining is the balance between personal and professional lives.
Expert Mind Solutions in Malaysia has one of the leading consultancy services to offer their clients who are new to business or struggling to deal with more unique challenges. They are likely to solve your strategies and establish a system that follows your situation.