June 29, 2019

Getting my shit together: separating business and personal finances

7 minutes

This is my journey to apply the book, Unf*ck your finances. The book is about personal finances but I’ve added actions specific to working for myself.

If you want a bit more context, the prelude pieces are Hope can be scary, Why do we never talk about personal finance?, and Getting my shit together: the plan for the next quarter.

Two days ago was money day.

I registered for GST, split my business and personal expenses, and defined my bookkeeping rituals (most people call these standard operating procedures).

I’m not done but the skeleton is there. Let me tell you separating business and personal expenses.

The accounts

Here’s my set up:

Business transaction account

Business savings account

Personal transaction account (IO)

Personal transaction account (The Regulars)

Personal transaction account (IRL spending)

Personal savings account (Sacred)

Personal savings account (Buffer and more-than-monthly expenses)

The system

I cover all business expenses and submit expense claims.

Invoices will be paid into the business transaction account. When this happens:

I transfer the GST to the business savings account

I transfer 30% of the remainder to the business savings account — this is income tax and profit savings

I transfer expense reimbursements to IO

I transfer the remainder to IO as my pay

When funds come into IO…

I hold funds in the account to cover upcoming fixed business expenses

I transfer funds to The Regulars to cover upcoming direct debits, known bills, and other scheduled payments

I transfer funds for discretionary spending to IRL Spending

All card payments and one-offs are put through IRL Spending which is then fed by the account it comes out of. Any business expenses are claimed and paid when the next invoice comes in.

Why do I do it this way?

It’s simpler to run the books with fewer transactions for reconciliation. Eg. 15 expenses show up as one expense reimbursement transaction on the bank reconciliation

I can simply reconcile the IO debits to the list of fixed business expenses and immediately spot any discrepancies

I can simply reconcile The Regulars debits to the list of fixed personal expenses and immediately spot any discrepancies

I can assess my variable spending in isolation — without any data manipulation or adjustments — just by looking at the transaction history of IRL spending

Because I have I can never spend more than I have available, because it wouldn’t be available to me

What I actually had to do

Open a new business transaction account

Change around ~25 personal direct debits / scheduled transfers to The Regulars

Separate my outgoings spreadsheet into two spreadsheets

Update my runway calculator to reflect a business and personal runway

This took a couple of hours. It feels good.

...more

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By Rosie Odsey

June 29, 2019

Getting my shit together: separating business and personal finances

7 minutes

This is my journey to apply the book, Unf*ck your finances. The book is about personal finances but I’ve added actions specific to working for myself.

If you want a bit more context, the prelude pieces are Hope can be scary, Why do we never talk about personal finance?, and Getting my shit together: the plan for the next quarter.

Two days ago was money day.

I registered for GST, split my business and personal expenses, and defined my bookkeeping rituals (most people call these standard operating procedures).

I’m not done but the skeleton is there. Let me tell you separating business and personal expenses.

The accounts

Here’s my set up:

Business transaction account

Business savings account

Personal transaction account (IO)

Personal transaction account (The Regulars)

Personal transaction account (IRL spending)

Personal savings account (Sacred)

Personal savings account (Buffer and more-than-monthly expenses)

The system

I cover all business expenses and submit expense claims.

Invoices will be paid into the business transaction account. When this happens:

I transfer the GST to the business savings account

I transfer 30% of the remainder to the business savings account — this is income tax and profit savings

I transfer expense reimbursements to IO

I transfer the remainder to IO as my pay

When funds come into IO…

I hold funds in the account to cover upcoming fixed business expenses

I transfer funds to The Regulars to cover upcoming direct debits, known bills, and other scheduled payments

I transfer funds for discretionary spending to IRL Spending

All card payments and one-offs are put through IRL Spending which is then fed by the account it comes out of. Any business expenses are claimed and paid when the next invoice comes in.

Why do I do it this way?

It’s simpler to run the books with fewer transactions for reconciliation. Eg. 15 expenses show up as one expense reimbursement transaction on the bank reconciliation

I can simply reconcile the IO debits to the list of fixed business expenses and immediately spot any discrepancies

I can simply reconcile The Regulars debits to the list of fixed personal expenses and immediately spot any discrepancies

I can assess my variable spending in isolation — without any data manipulation or adjustments — just by looking at the transaction history of IRL spending

Because I have I can never spend more than I have available, because it wouldn’t be available to me

What I actually had to do

Open a new business transaction account

Change around ~25 personal direct debits / scheduled transfers to The Regulars

Separate my outgoings spreadsheet into two spreadsheets

Update my runway calculator to reflect a business and personal runway

This took a couple of hours. It feels good.

...more

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Getting my shit together: separating business and personal finances

Getting my shit together: separating business and personal finances