You Are Being Audited
The day I received a letter from the Internal Revenue Service (IRS) stating I was being audited, I thought, “I have the smallest business in America. What would make them audit me?”
My accountant at the time explained to me that when you have a business, it’s not whether or not you will be audited, but when you will be audited. Click To TweetWhen you’re a one-person shop, it can feel like your business finances and your personal finances are one and the same.
Personal and Business Finances Are NOT The Same
You may have had only one bank account for the past twenty years, but it’s now time to make sure you separate your personal finances and your business finances.
If the IRS ever questions whether your business is an actual business or hobby, they will check to see that you have separate checking accounts for your personal and business finances.
Mingling these two will cost you dearly come tax time and make it ten times harder to organize the two. Also, make sure you keep them both under control; if your personal finances are not under control, your business finances aren’t going to be much better.
Start Getting Organized Today
Without a budget, you’re not going to be able to plan your activities so that you’re productive and getting the results you want. A reasonable budget for both your personal life and business expenses is a crucial component of any successful business plan. Make it a yearly exercise, divided into quarters.
My advice to you is to organize your finances in a way that gives you prompts and warnings so that you can exert a degree of control over them, planning and making decisions accordingly.
It really helps to know if you are over or under budget before it actually happens.
Knowing your income and expense projections as early as possible is valuable information.