Managing your personal finances can be an often-overlooked to-do item when you’re trying to start or run your own e-commerce business. But it’s essential that both you and your business stay on track if you want to succeed. Whether you’re just launching your site or you’ve been in the e-commerce space for years, here are some tips to make sure you’re properly managing both your personal finances and your business finances.
Open Separate Financial Accounts
The most important step to take when managing your personal finances is to make sure they are separate from your business finances. This can be accomplished by opening separate checking, savings, and credit card accounts. It’s tempting to combine everything in an effort to cut down on time and energy spent on bookkeeping, but commingling your assets causes a much bigger headache come tax season—and every day, if you don’t stay on top of it.
Value Proper Bookkeeping
Proper bookkeeping is another important aspect of managing your finances.
Personal bookkeeping includes budgeting and planning for the future. Bookkeeping for your business involves recording your day-to-day sales and expenses, and filing receipts and proof-of-payment documents as backup. This information will help ensure you get all possible tax deductions.
Manage Business Risk
All businesses have some degree of risk. Make sure your personal finances are protected from business risk through the use of insurance, emergency funds, and diversification.
As a sole proprietor or partnership, you are personally liable for your company’s debts. The best way to mitigate this risk is to make sure your e-commerce business is properly insured against all of the most common types of setbacks; general liability, product liability, and cyber insurance are important coverages to consider.
You should also make sure you have at least three to six months’ worth of personal expenses saved in a rainy-day fund in case your business is not profitable enough to provide an income or an emergency comes up that halts production and/or sales.
And, be sure your income sources are diversified. You don’t want all of your eggs in one e-commerce basket if you can help it. Investing a portion of your assets in the market or earning extra income through rental properties or other side hustles can help reduce the risk associated with running a small business, and make sure your personal finances are covered in case anything happens.
Get Started Today
Keeping track of everything can be time-consuming and difficult, but these tips can help you get started. At Tree Street Advisory, we will make sure your personal and e-commerce finances are properly managed so that you don’t have to worry. Call (615) 219-9802 or schedule a free 30-minute introductory appointment here.
Allan Phillips is a Certified Financial Advisor (CFP®) and founder of Tree Street Advisory. He works with E-commerce business owners and Physicians who are concerned with issues such as cash flow management, high-earner retirement planning, debt repayment approaches, tax strategies, and business planning.