Separating business from personal: How to simplify expense management

As small businesses grow into larger small and medium-sized businesses (SMBs), managing finances can become more convoluted. One key step in keeping financial operations run smoothly is separating business purchases from personal expenses. This separation can make a big difference in how well small and medium-sized businesses manage cash flow, track expenses, and make smart business buying decisions.

Impacts on cash flow, visibility, and reconciliation
Intertwining personal and business expenses can lead to increased confusion around cash flow, which can impact important decisions such as paying outstanding invoices, investing in growth, and covering operational costs. It becomes difficult to track:

• How much cash is available for business needs
• When and where cash flow is in or out
• How many purchases made by employees need to be categorized and audited

Without having clear separation, it increases the risk of mismanaging cash flow, leading to losses in time and cost savings. Moreover, it becomes challenging to segment spending into relevant categories and make more informed decisions around cost and spend control. It’s harder to see which products bought attributed to business growth or operations, where budgets were allocated for specific departments, and how to optimize purchasing decisions based on past buying trends. This lack of clear tracking makes it challenging to make better data-driven decisions that could improve the business’s bottom line. It also becomes manually time consuming to bookkeep each expense, categorize each as a work purchase, reimburse the team for using personal payments, and reconcile those expenses.

Better financial planning, more control, and a simplified process
There are many benefits in keeping work and personal finances separate: tax advantages, better financial planning, more visibility, and increased time savings that can be used towards more value-added work. When finances are separated, small and medium businesses get a more accurate view of overall business financial health. Accurate records allow for better budgeting, forecasting, and finding more ways to save year over year. It also improves spend control by helping SMBs monitor cash flow, set spending limits, mitigate unnecessary expenses of employees — ensuring business resources are being allocated appropriately. In addition, separating business expenses simplifies the bookkeeping process. From an auditing perspective, this keeps the books clean as all associated business expenses will already be accounted for, reducing the need for manual entries and backtracking. Rather, time saved can be spent more on making strategic decisions and growing the business.

Ways to keep expenses separate
As a start, small and medium businesses can look into having a business-only purchasing account, like Amazon Business. Having a centralized purchasing account means all financial transactions can be found in one place and kept organized. Here are five things you can do to get started with Amazon Business:

1. Make an Amazon Business account: Signing up for Amazon Business is free and easy. You can also use the email from your personal Amazon account and switch between your personal and Amazon Business accounts.
2. Invite users: Empower your employees to get what they need while maintaining spend oversight. Easily invite users to join your account while keeping their own log in credentials. Everyone’s purchases will be secure, while as the account administrator you get visibility into their selection and spend.
3. Create lists: To help make the repurchase process easier, create different types of lists to help improve efficiency and drive towards smart business buying.
4. Get spend insights: Visualize spend data through customizable or pre-built dashboards and reports to track progress towards your goals.
5. Join Business Prime: Unlock perks for your business with Amazon Business Prime including fast, free delivery, flexible payment terms, and more.

Moreover, a business-only purchasing account can give you access to more benefits such as access to more business-relevant categories and better prices, making it convenient for your business. Furthermore, it’s important to educate your team on the importance of separating business purchases from personal accounts by establishing clear guidelines around expense reimbursements and the use of personal credit cards. With boundaries and one overarching business account in place, managing purchasing becomes easier — reducing hours spent on reconciliation and expense management.