Why You Should Keep Your Personal & Business Expenses Separate.

When you have a small business, giving yourself a “paycheck” and paying personal expenses from that may seem silly to you. After all, it’s your money, why not just pull everything from the same pot and save yourself a step, right? WRONG. Turns out, there are some really solid reasons you should keep your personal expenses out of your business account.

Saves hours on bookkeeping.

Shuffling through those extra transactions (and your bookkeeper having to chase you down to verify what’s personal and what's business) eats up time, and time is money. Furthermore, it’s even more likely that some transactions will be miscategorized and could result in inaccurate reporting on your taxes.

You may be violating the terms of your business account.

Your business account has terms and conditions that prohibit you from using it to pay for personal items. Furthermore, the regulations on business cards are different, and you may forfeit some of the protections you would have if you used a personal card. If the card issuer decides you’re violating the agreement, they can close your account without warning.

It’s easy to get out of control.

When you aren’t keeping transactions separate, it’s easy to swipe, swipe, swipe your way beyond what you SHOULD be paying yourself. All those personal expenditures eat into your cash flow and you may find yourself short when you need extra funds for the business.

Just because you may be able to get away with making personal expenditures from your business account and on your business credit card, doesn’t mean you should. Keeping everything separate will save you time, money and headaches when it comes to tax reporting, applying for loans and heaven forbid, an audit.

For those of you that DON'T keep transactions separate, why? What would convince you to make that step? Let us know in the comments!