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Growing Your Business – Why Separating Business and Personal Finances is Good

This article is not all about finances. Well, it’s partially about finances. More importantly, it’s about how to grow your business. Growing your business doesn’t just happen by magic. There’s no business growth fairy that takes away a balance sheet and leaves a bigger business under your pillow. It takes consistent, carefully investment to create your own success.

And that investment starts with something that you might not have considered: Separating your business and personal finances. Surprised? Here are the reasons.

First, you’ll want to separate your business and personal finances for tax purposes. If you keep them combined, you might not be eligible for certain deductions, but if you separate them, you may be entitled to deduct expenses for your home office and mileage allowance. Likewise, you may be responsible for paying certain taxes on your business that do not apply to your personal income. Separating your finances is the only way to ensure that you properly follow all tax laws and receive all advantages to which you are entitled by law. That can grow your business by clarifying your paperwork and possibly making more money available (because of more deductions) which you can reinvest in your business.

Another important reason for separating your finances is to get a loan or a grant so you can invest in your business. Separating your finances helps to establish a paper trail and helps you to create financial reports that demonstrate the business’ performance. If your finances are separated it will be much easier to determine which income and expenses belong to the business itself.

Third, separating your finances can help you decide how best to grow and develop the business as well. You will be able to see the areas in which the business excels as well as those areas in which it needs some extra help. You can generate targeted, accurate reports and financial statements that show at a glance how the business performs in various areas.

How Can I Separate My Business and Personal Finances?

The easiest way to separate your business and personal finances is to open a business bank account. If you use credit to make business-related purchases, apply for a card in the name of the business. Have all payments made to the business account, and use only those funds and the business credit card to make purchases.

How Do I Get Paid?
You have multiple options for paying yourself. Some business owners find it best to write themselves a set paycheck every week. If you are confident that the business will retain enough funds to pay your salary each time, this will streamline the process and make it easier to accurately pay your personal income taxes.

However, if your business is new or unstable, you may find it better to pass funds through the business account to your personal account. You might decide to retain just enough money in the business account to pay for expenses, and transfer everything that is left into your personal account. This is an ideal solution for those who have many personal expenses but few business expenses and earn wildly different sums on each contract.

Setting Up and Maintaining Bookkeeping and Accounting

Many business owners find themselves confused and overwhelmed by the paperwork that is involved in maintaining separate accounts. Consider hiring outside help. A Virtual Assistant company can set up and maintain your bookkeeping and accounting. Your VA can even handle payroll, writing your paycheck each week. You can maintain as much or as little control over the process as you desire. You can hire the VA for a set number of hours per week or per month, or simply retain his or her services on a per-project basis.

Ultimately, separating your business and personal finances can seem like a complicated task in the short term but in the long term it is an effective way to grow your business.

Why Your Business Plan Does Not Work and How You Can Write the an Effective One

There are many people asking me to help them to write business plans. Meanwhile, if you are planning to get financing to start small business, then business plans are mandatory. Yet most people that start a business do not want to utilize them. The reason of this is because business plans are made commonly to run business for the next five years or even more. Once the created business plans, it is very seldom that business owners move to look at the plans again. In this article, I will give you some tips how you can really utilize your business plan so that you can get maximum results.

1) It is important to check and review your business plan quarterly. It is made for you as a guide for your business and thus you need to update the content frequently. It is not intended to be created just as a static note. Evaluate things that are working properly and take out things that are not. Two of evaluation method, which are to define strategies that work and to identify the ones that do not work, are the most basic tools to improve the effectiveness of your business strategies.

2) Write the value as well as culture of your business into your business plan. This is not for financing purpose, but this one is to enhance working productivity within the business itself. State how many hours in a day you want to work in the business, and on the business. Define the schedule of your holiday, so that you will have life balance between family and our work. Again, this information may not be useful for financial institution like a bank or private lenders, but it is useful to increase personal value of your business. Soon you will see that you will need to have strategies to get more human resources to run the business, and design better systems for your business.

3) You need to be able to convert your business plan into action steps. As mentioned that your business plan is made for strategies for the next several years ahead. It represents the blueprint of your business. Thus you will need to convert long term goals into a short term strategies. Short term strategies should represent each of long term strategy and you should also incorporate resources that are needed to have these done. Usually short term plan is set within four to six months period of time. This concept works because your brain will not able to see the whole big picture that your long term goals stated. If you design it with several short term goals, then it is more measurable for your logic to achieve these.

From three I above points, I hope you have general picture on how to design a business plan that works on every business. Evaluate your business in certain period of time and have this adjusted to the real situation.