Gave a talk last week to a group of solo-preneurs about the 5 mistakes that businesses make with cash management.
Had a blast!
What was the #1 issue?
Commingling…when you have only one checking account and you run both your personal and business transactions through that.
Don’t do it.
And if you’re doing it, stop it. Right now.
How do you keep your business and personal accounting separate?
Credit cards: Apply for a BUSINESS credit card. While you could use a personal credit card strictly for business use, I don’t recommend this; because some banks, like Bank of America, don’t let you download your personal credit card transactions into QuickBooks, only Quicken. Defeats the whole purpose of downloading transactions, don’t you think?
Checking accounts: Open a BUSINESS checking account. While you could use a personal bank account strictly for business use, I don’t recommend this either; banking regs don’t allow you to deposit a check written to your business name (even a dba) into a personal account. Plus, business account statements are generated on a calendar month basis, so the closing date is always the last day of the month. The closing dates on personal accounts are 30 days from whenever you opened the account. Makes bookkeeping messier.
Expense reports: Remember when you had a j.o.b. and you paid for something business related with your personal funds? You then filled out and submitted an expense report to get paid back. Same principle applies. You and your business are separate. Treat them that way. Click here to download a sample expense report.
Bookkeeping software: Have one company file for your business and another company file for your personal. Do not, under any circumstances, run both your personal and business books through one QuickBooks company file. Two big reasons: it screws up and complicates the bookkeeping big time AND should your business get audited, the IRS has a look at your personal stuff as well and you don’t want to give them one iota more than what they ask for. Trust me.
Got questions? Hit me up with them in the comments box.
To your success!