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An entrepreneur’s tips on separating business and personal finances
By ATB Financial 5 February 2019 3 min read
You know that feeling of going to the dentist and being asked if you’ve flossed? We know that’s how many small business owners feel when they’re asked if they’ve seperated their personal and business expenses. The answer? It probably didn’t happen, at least not as often as it should have.
We get it: when you’re starting out, it can be difficult—if not impossible—for you to keep your life and business finances separate. So what’s an entrepreneur to do? We caught up with Alisha Olandesca, Co-founder and COO of SOS Charging Solutions—which provides customized mobile phone chargers to events across North America—to hear her experience and advice when it comes to keeping finances strictly (or not so strictly) business.
Mixed finances: a startup necessity
When Alisha and Joel—her husband, co-founder, and the company’s owner—opened up the business, they did so on a chequing account and a credit card. They didn’t have a traditional business model with a guaranteed revenue stream, so they weren’t eligible for a business loan. “The business credit card wasn’t enough to get us going,” shared Alisha, “so we had to self-fund the business. Although we kept track of everything meticulously, there was mixing and overlap.”
And it didn’t help that the duo opted to start their business right before quite a few disasters struck: Joel was laid off from his previous job, and Calgary entered its worst recession in 30 years. “At the time I was terrified,” admitted Alisha, “but looking back, it was an incredible motivator.” The couple evaluated what resources they had, pared down their monthly expenses as much as possible, and got to work.
Separate finances: a result of growth
A little over two years into their business, they switched banks to ATB and qualified for a business line of credit. “This allowed us to completely separate everything,” explained Alisha. “I always thought that since we had the odds stacked against us—a startup growing in a recession with limited resources—if SOS had to close up shop, I wanted there to be as much separation [financially] as possible.”
“Having that line of credit allowed us to continue to grow the way we wanted to. It was amazing to have some security.”
As their business grew and so did their cash flow, Alisha and Joe chose to reach out for support. “We turned to our accountant and bookkeeper for advice. We’ve also learned from mentors—both business and professional— and external CFO’s.”
The benefits of keeping finances separate
“Having greater control over our cashflow was a huge benefit of keeping things separate,” said Alisha. “Although it can be tempting to take large amounts of capital out of your business, we wanted to take small amounts on a very regular basis, and leave cash in the business to continue funding growth. It also means that Joel and I don't have to pay SOS's bills anymore,” she added.
“It's so much cleaner this way,” Alisha spoke of separating their finances. “Taxes are a breeze. SOS handles it's payments, and we handle ours.”
Tips for entrepreneurs on separating finances (and more)
Keep track: even if you can't afford a bookkeeper right away, keep track of everything. It's tedious but worth it—especially when you find out how much your business owes you. Sign up for QuickBooks and make sure that your clients pay your business and not you personally.
Take care of your credit score: you can keep things separate all you want, but as the primary shareholder your credit comes into consideration when looking for capital to grow your business.
Keep your debt low: this way you can personally handle the ups and inevitable downs that come with owning a business.
Have a plan for weathering storms.