An entrepreneur’s tips on separating business and personal finances
By ATB Financial 2 February 2024 3 min read
Do you know that feeling of going to the dentist and being asked if you floss your teeth daily? We know that’s how many small business owners feel when they’re asked if they’ve separated 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 your new venture, it can be difficult to keep your life and business finances separate, particularly if you’re starting out small. So what’s a budding 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 share her experience and advice when it comes to managing your finances, and when and how to keep things separate between business and personal.
Mixed finances: a startup necessity
When Alisha and her husband Joel (who is also the company’s co-founder and owner) opened up their business, they did so with 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 some mixing and overlap.”
It didn’t help that the duo opted to start their business right before quite a few economic challenges 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 they got to work.
Separate finances: a result of growth
A little over two years into the operations of their business, they switched banks to ATB and qualified for a business line of credit. “This allowed us to completely separate everything,” explained Alisha. “As a startup growing in a recession with limited resources, I always thought we had the odds stacked against us. If I had to close up shop, I wanted there to be as much financial separation 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, so did their cash flow, and Alisha and Joe chose to reach out for further support. “We turned to our accountant and bookkeeper for advice. We leaned on our business and professional mentors for additional guidance, as well as external CFOs.”
The benefits of keeping finances separate
Having your business and personal finances separate gives you a clear snapshot of the health of your business, and makes your bookkeeping much more seamless. “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 regular basis, and leave cash in the business to continue funding our growth. It also means that Joel and I don't have to pay our company’s bills anymore,” she added.
“It's so much cleaner this way,” Alisha spoke of separating their finances. “Taxes are a breeze. We handle our corporate payments through the SOS accounts, and we handle our personal budgets and expenses separately.”
Tips for entrepreneurs on separating finances (and more)
Keep track: Even if you can't afford a bookkeeper right away, keep track of everything, and be meticulous. It's tedious, but worth it - particularly when you find out how much your business may owe you. Sign up for an online bookkeeping software system such as QuickBooks and make sure 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 you’re looking for capital to grow your business.
Keep your debt low: Consider having an emergency fund in place so you can prepare for and handle the ups and inevitable downs that come with owning a business.
Setting up good financial management habits as you start your business will help reduce headaches down the road. Further, it will give you a clear picture of the health of your business, letting you make the important decisions to help you continue to scale, grow and prosper.