One of the most common mistakes business owners make is not keeping their business and personal finances separate. Even if you’re just starting out, it’s essential to split up these two parts of your money life. Treat your business, big or small, like a viable entity.
Here are some of the key reasons why you should keep the two separate
- It doesn’t look professional: If you are dealing with a vendor or customer and you use your personal credit card to pay a business expense, you are giving the impression that you are not a real business owner.
- Having a separate bank account and credit card for your business will make it easier to navigate your records. Not only will you be able to detect discrepancies in cash flows, but you will also be more accurate in claiming tax deductions for your business costs.
- In the same way, lack of separation gives a negative impression in the case of a revenue audit. Revenue will be quick to deny deductions for non-business related activities. If you want Revenue to look at your business as legitimate and not a hobby, keep business and personal separate.
- Your business deductions and income aren’t clearly designated. If you want to be able to claim expenses as deductions, you must be able to show that these deductions were for business purposes. Trying to sort through your personal records at tax time is a nightmare. Capture business expenses in your business account to make it easier to claim those deductions.