Small Business Accounting: Don’t Mix Business with Pleasure (or Your Business with Personal Expenses)

by | Dec 8, 2017

Traditional forecasting can be a losing endeavor  

If you're a business owner, I bet you’ve been told you should be forecasting. This traditional advice suggests that there is a specific model to follow or a manual to use. However, as you and I both know, the reality is that when life gets in the way, your forecasting...

Understanding Financial Accountability  

"I'm not here to give you the good news."  I say that phrase to clients much more often than you might think. Because I ultimately want to celebrate their business's success with them, I’m there to tell them the actual state of their company's finances and guide...

Trust and Commitment in a Remote Team 

A couple of months ago, I made my first overseas trek since 2017 – not for vacation – but to meet with the rest of the Fritz Financial Solutions team of accountants in the Philippines. It was important to me to show these women the time and attention needed to...

Client Spotlight: Andrea Freidman 

As a business owner, one of the most significant challenges to overcome is work-life balance. This dilemma has only been exacerbated over the last several years and forced many "traditional" industries, such as the legal profession, to change their ways. Long before...

MEET THE TEAM: Joy mercado, Staff Accountant 

Joy Mercado joined Fritz Financial Solutions just over six months ago after completing an accelerator program with TOA Global, our offshore recruiting partner specializing in the accounting industry. Joy has quickly become an invaluable team member doing highly...

Small business accounting and bookkeeping intelligence can help increase your chances at small business success–in today’s blog, we’re wrapping up our series about the six good habits that are vital to successful small business management. We’ve talked about reconciling accounts, paying bills on time, staying on top of receivables, keeping up with payroll and sales taxes and mastering your mail. Today, we’re tackling possibly the most challenging of the six habits: keeping your business expenses separate from your personal ones.

It’s more difficult than it sounds—especially for the proprietor of a company. After all, your small business is your life, and vice versa. However, with a little dedication and a few relatively simple small business accounting tricks, it’s possible and can help you avoid some major headaches.

One reason entrepreneurs like you might choose to run personal expenses through their business: reducing their tax liability. I’ve got three letters for you: I-R-S. If an auditor comes knocking on your door, an inordinate number of personal expenses attached to your business account can cost you. Also, keep in mind (and make sure employees know) that the IRS requires an invoice or receipt for any expense you deduct more than $25. You’re probably not going to be in huge trouble if it turns out you’ve just run a few dinners or Uber rides through your company tab, so don’t fret too much. However, if the taxman discovers you’ve claimed thousands of dollars of personal stuff as business expenditures, then it’s time to worry—you’re looking down the barrel of expensive penalties, or even jail time.

Aside from the pricey IRS implications, mixing business and personal expenses in small business accounting can muddy the waters and make it hard to determine whether your business is actually profitable or not. It’s difficult to plan for the immediate future and long term when you’re not sure how you’re doing. What’s more, if you’re looking to raise venture capital or sell your business down the road, you’re going to need to demonstrate to potential investors or buyers what it actually costs to run the business, if you’re turning a solid profit or not, and if you’re operating a lean outfit. Imagine how it’d look to the people you’re trying to get money out of if you, say, spent $3,000 at Starbucks on the company dime last year, or if you bought all your groceries with your business credit card. If you’re paying yourself a salary or making monthly draws, it’s a good idea to take that money out in modest, regular increments, as partner draws or owner distributions.

The list of solutions to the problem of mixed-up accounts is relatively straight-forward. Make sure you have separate, dedicated checking and credit-card accounts—even if you’re a one-person outfit making all the purchases and paying all the bills. Then, try and keep the checkbooks and cards in separate places—different locked drawers of your desk, or different sections of your wallet, for example—to cut the chance of mixups. If you need any more advice or tips on keeping the divide in place, feel free to reach out to me at daliah@fritzfinancialsolutions.com and I’ll be happy to talk you through it, and tell you more about our professional small business bookkeeping services.

Traditional forecasting can be a losing endeavor  

If you're a business owner, I bet you’ve been told you should be forecasting. This traditional advice suggests that there is a specific model to follow or a manual to use. However, as you and I both know, the reality is that when life gets in the way, your forecasting...

Understanding Financial Accountability  

"I'm not here to give you the good news."  I say that phrase to clients much more often than you might think. Because I ultimately want to celebrate their business's success with them, I’m there to tell them the actual state of their company's finances and guide...

Trust and Commitment in a Remote Team 

A couple of months ago, I made my first overseas trek since 2017 – not for vacation – but to meet with the rest of the Fritz Financial Solutions team of accountants in the Philippines. It was important to me to show these women the time and attention needed to...

Client Spotlight: Andrea Freidman 

As a business owner, one of the most significant challenges to overcome is work-life balance. This dilemma has only been exacerbated over the last several years and forced many "traditional" industries, such as the legal profession, to change their ways. Long before...

MEET THE TEAM: Joy mercado, Staff Accountant 

Joy Mercado joined Fritz Financial Solutions just over six months ago after completing an accelerator program with TOA Global, our offshore recruiting partner specializing in the accounting industry. Joy has quickly become an invaluable team member doing highly...

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