1. Separate Your Accounts and Stop Living Out of Your Business Bank Account
The number one ‘mistake’ we see business owners make every day is not separating business and personal finances. It’s a tricky one because you might be a sole trader, your business might have started as a side hustle, or you might think you’re too small to have separate finances – but if there’s one thing that causes major headaches, particularly at tax time, it’s not having separated your business and personal finances.
From day one (or day one thousand and one, no judgment here), it’s important to keep your business and personal finances as separate as you can. One way to do this is to have separate bank accounts for your business (even if they’re with the same bank), and we recommend creating at least these three:
- An everyday expenses account – similar to your everyday personal banking account, this is where all your invoices or sales get paid into and all your expenses, like your client lunches or stock purchases, come out of.
- A tax account – calculate regularly (or have us do it for you!) how much you will likely need to pay in tax and GST, if you’re registered. Pop it aside in this account, so that there are no nasty surprises or sleepless nights come the end of the quarter or financial year.
- A business buffer account – like a personal emergency fund or savings buffer, your business needs a buffer too that can cover 3-6 months of operating expenses if you were to have a few lean months.
As our Founder and women in business cheerleader Emma says: ‘figure out how much it takes to keep your business lights on each month, and go from there!’
Figuring out how much it takes to run your business each month is much easier when you have the right software setup. If you want to get started using Xero, Quickbooks, Reckon or MYOB – book a session with our team!