Does this sound familiar? You went to a craft show and sold some work, did your happy dance and deposited the money in the bank. Because you’ve sold some work, you ran straight to the supply store to pick up those lovely shiny objects you’ve been coveting. Then you ordered some more supplies online, then paid for some business cards and sent a cheque with a craft show application. No problem, you’ve been selling work lately.
Meanwhile, your husband/wife looked at the bank account, saw money and paid some bills. And now you’re looking at the bank account and what the heck? Where’s the money? You’re not sure how much money is going in or out. Budgeting is overwhelming. Costs are rising, and you're losing track of where you stand. You know you “should” be earning more based on sales volume. In practice, you still can't make ends meet and you never seem to have enough cash in the bank. You wish you could run reports (expenses, income), but you can't access the figures (because it's all mixed together).
One of the biggest mistakes new entrepreneurs make is to mix their business and personal bank accounts. No matter how small your enterprise, if you sell ANYTHING, you are in business and in order to be in business successfully you must track every cent you make and spend. Do yourself a favour and separate your personal and business bank accounts. No more comingling of accounts, no more gray area, no more personal checks for business expenses.
Whether you open a second personal account or a business account depends on where you are in your business career. Many makers who are just starting out haven’t yet registered their business, a business bank account requires that you be hold a Master Business License which you obtain by registering your business. (Registering your business is not legally required in Canada, you can sell under your name without registering).
Rarely is a business bank account free so for makers who are new, or who are selling very part-time, justifying the cost of a business account is hard. My suggestion for those who fit this category is to open a free personal account and use it for business only.
Make it your business bank account. Deposit ALL of your sales income into your business account. Pay ALL of your business expenses from this account. DO NOT pay any personal expenses from this account. If you want to pay yourself, move your “wages” to your personal account and note how much you are paying yourself. At the end of every month go over your bank statement with an eagle eye and make sure you know where every cent is.
Get a separate credit card to manage all expenses like online shop fees and PayPal transactions. Remember: A credit card is free as long as you pay off the balance every month, and there are plenty of cards out there with no annual membership fees.
By separating your accounts, your personal financial choices (good or bad) can’t affect your business — and vice versa. You'll also find you have better control and far more sanity when it comes to your finances.