Top 7 Reasons to Keep a Separate Bank Account for Business Funds

You’ve probably heard that it’s important to keep your personal and business finances separate. Here are seven reasons why, courtesy of our friends at GoDaddy Online Bookkeeping.

This post is brought to you by GoDaddy Online Bookkeeping, the simplest way to manage your small business finances online. Sign up today for a less taxing tax time!

When you first started your business, especially if it began as a side gig, you probably just used your personal bank account to manage your income and expenses. Somewhere down the line, though, you have to make the choice to open a business account or stick with your personal account. We’re going to go out on a limb and say you should definitely keep your business and personal finances separate.

Why? Let’s take a look at 7 reasons why you want to consider it.

1. Deductions

Are taxes coming up and you want to reduce your tax obligations by claiming deductions? You can do that even if you use your personal bank account, sure, but it’s much easier to track your business expenses when they all come out of the same funding source. This prevents you from confusing the time you bought printer paper at your local big box store from all the other times you bought groceries there!

2. Taxes in General

Speaking of taxes, tax time is already a mess if you keep everything separate. When your personal and business finances are mixed, it’s going to be that much worse. Going through simple transactions becomes that much tougher, especially when the amount of income you deposited doesn’t add up to the amount of income on the 1099’s your clients sent you.

3. Professionalism

You’re trying to establish yourself as a real, professional business. The difference between a client or customer writing a check out to “Penny Smith” versus “Iowa’s Best Coffee” is huge. It sets a precedent for both the public and for you. Having a business account lets you maintain the level of professionalism you want.

4. “Hobby Business”

While the IRS generally doesn’t care if you consider your business a hobby or not (as long as you’re paying taxes on your income), they do care if you’re making deductions on something they don’t see as a “real” business. You must show a profit in three years out of five so you’re not considered a “hobby business.” It’s much easier to prove this 3 of 5 rule if you have a business account.

5. Mental Health

If you’re taking your business seriously, you want it to run as smoothly as possible. This includes your finances and maintaining a healthy growth pattern. When mixing your personal and business finances, you run the risk of getting an inaccurate view of your company. This can cause strain on not only the business but your mental health.

6. Reports

Growing your business also involves running reports to see where you truly stand. GoDadddy Online Bookkeeping automatically pulls in your business’s income and spending and creates reports like your “Profit & Loss or “Top Vendors.” Mixing business and personal income will confuse these reports and keep you from seeing a clear snapshot of your business’s financial health.

7. Incorporation

Thinking of incorporating your business? Then you’re going to have to keep personal and business finances separate. No matter if it’s a corporation, a partnership or incorporated sole proprietorship, the IRS will require you to separate the two worlds. If this is ever going to be something you do in the future, you might as well start it now. It will help ease the process going forward and prevent any big issues that might pop up during the transition.

Do you keep your business and personal finances separate? What are your tips to maintaining the separation?

Are you getting the most out of your Shoeboxed account?

If you just signed up for a Shoeboxed account, it’s a good idea to make sure you’re taking advantage of all the powerful tools your account has to offer. Here’s how.

Not to toot our own horns, but we think Shoeboxed is pretty darn intuitive and user-friendly. But if you’re just getting started, it’s a good idea to make sure you’re taking advantage of all the powerful tools your account has to offer.

Here are a few common mistakes we frequently see small business owners making when they first start using Shoeboxed:

Treating every document as a receipt

Remember that Shoeboxed is for digitizing all of your paper documents, no matter their size or shape! That’s why we’ve created tabs for business cards and other documents.

It’s important to weed out any documents you don’t want included in your tax totals from the Receipts page – otherwise, when you go to generate a report, the application will pull those documents into your spreadsheet.

It’s easy to separate mislabeled items like bank statements and business cards from your receipts. Simply click on the document in question, scroll down to the lower righthand corner of the pop up screen, and click the Not a receipt button to choose the appropriate section to send it to.

Failing to use categories

Shoeboxed uses a sophisticated algorithm to detect which tax category each receipt should be placed in based on what you purchased and where.

But not all receipts all created equal! Sometimes the ink gets smudged, or maybe you visited a mom and pop shop that our algorithm doesn’t recognize. In these cases, it’s important to make sure each of your receipts isn’t left without the right category.

Specify the date range in question, then under the categories tab, select Uncategorized. This will pull up all of the receipts that Shoeboxed did not categorize.

From here, you can adjust totals and place each receipt into its proper tax write off category.

If you don’t categorize your receipts, you could be missing out on lucrative deductions come tax time!

Skipping the notes section

The notes section in your receipt manager is a powerful tool that can save you hours of time when doing your taxes.

When you select an individual receipt, you’ll see the scanned image of that receipt. Next to it, you’ll see a section labeled Receipt Notes. This is where you can add additional information about when and where the purchase was made, and more importantly, why it’s a valid tax deduction.

When exporting your receipts to a spreadsheet, your notes will automatically be included. This will allow your tax professional to see all of the information they need regarding each particular transaction.

When you don’t complete the notes section, you may have to field email after email from your accountant asking you “What is this expense?”

Remember that just because you remember the $250 dinner was a business dinner, doesn’t mean your tax preparer knows that. Getting specific in the notes section will make it easy for them to approve the write-off, saving you both time (and saving you money!).

What’s your favorite feature within your Shoeboxed account? What features do you still have questions about? Let us know in the comments — we’re here to help!

Shave 5 Hours Off Your Work Week with These 7 Productivity Tips

While these 7 productivity tips may not shave your work week down to a mere 4 hours (a la Timothy Ferriss), they will help you significantly reduce the amount of time it takes to complete everyday tasks.

The key to achieving powerful productivity is to work smarter, not harder.

While these 7 productivity tips may not shave your work week down to a mere 4 hours (a la Tim Ferriss), they will help you significantly reduce the amount of time it takes to complete everyday tasks.

1. Prioritize your goals

You probably have a monster to-do list, but let’s be honest – you’re not going to get it all done today. You might not even finish it this week.

Choose one or two items that you’d like to finish today, and forget about the rest of the list. By focusing on just a few key items, you’re more likely to finish them fast without getting overwhelmed. You can then move on to the next important item on your list, but only if you have time.

2. Stop answering emails

Are you email communications like a series of thank you cards that never end?

“Got the report, will get edits to you ASAP.”

“Ok, thanks!”

“You’re welcome!”

Those last two responses, while polite, are wasted time. Send five or 10 emails like that each day and you’ve already wasted 30 minutes of your day.

If you’re a notorious “thanker,” send a single email to your colleagues letting them know that from now on, you’ll only respond if absolutely necessary, and that if they don’t hear from you, they can assume their message went through and everything is good on your end.

3. Turn off sound notifications

Ding! Facebook notification.

Ring! New email messages.

Chirp! Someone favorited your tweet.

It’s difficult enough to concentrate on work under the best of circumstances, but it’s practically impossible when you’re constantly distracted by interruptions.

Turn your phone on silent, and turn the sound off on your computer. Set aside specific times to check email, check social accounts, and make phone calls. If it’s not your set “Facebook time,” then hands off and no checking allowed!

4. Take frequent breaks

Taking a break every two hours is good for your brain and increases productivity. Go for a walk, grab a snack, or make a personal call. Stepping away from your work will give your brain a chance to hit the refresh button, and you’ll come back rejuvenated with new ideas.

5. Stick to a pre-set end time

Choose a set time to end your work day and stick to it. This time may fluctuate from week to week, and even day to day, but whatever time you choose, commit to it and see it through.

If you don’t, you’re sure to spend hours working late each day, because there will always be just “one more thing” you’ll want to get done.

6. Set aside daily “scanning time”

If you let receipts and papers build up over weeks and months, you’ll be faced with some serious scanning time and an outdated Shoeboxed account. Take a few minutes at the end of each day to scan any receipts that have accumulated. This will also save you tons of time (and money) during tax season.

7. Get less done

Remember that when you die, your inbox won’t be empty! Do you really need to get as much done as you think you do? Where is this pressure to get more done coming from – your boss, your colleagues, or yourself?

When you ask the overachiever in you to step aside, you cultivate a work-life balance that will only improve your overall productivity when running your business.

What would you do with an extra 5 hours of free time each week? What are your favorite productivity tips?