When you continue to mix your personal and business expenses, it can make balancing your business accounts and keeping an eye on business expenses more difficult. Here are three things to watch out for to make thing easier:
Mistake #1: Using the wrong card for purchases
When you have both personal and business credit cards, it can be easy to pull out the wrong card for purchases. If you use your personal account for business transactions, you’ll then have to go through your transactions one by one at tax time to make sure all your business expenses are included. This can be a tedious process. To avoid this, add a bright sticker to your business card or nickname it differently for payWave so you get the right card out.
Mistake #2: Paying your business credit card repayment from your personal account
To get a true reflection of your business cash flow, you want to pay your business credit card balance or monthly repayment from your business transaction account. Even if this means that you first transfer the money from your personal transaction account into your business transaction account. This ensures a total picture of your business finances, so when you do a cash flow report on your business, you get an accurate assessment of your performance. Many financial institutions have loan selector tools or calculators to help you see what is best for you and your needs.
Mistake #3: Using your business credit card when a business loan could be better
If you use your business credit card for large purchases in your business, you might be better off applying for a business loan. While a business credit card might give you a certain number of days interest free, when interest is charged, the interest rate is higher than a business loan. Many financial institutions have loan selector tools or calculators to help you see what is best for you and your needs.
If you use your business credit card in the right way, at the right time, you could save yourself a lot of hassle at tax time and make things easier for your accountant.
Things you should know
This information does not take into account your personal circumstances and is general. It is an overview only and should not be considered a comprehensive statement on any matter or relied upon. Consider obtaining personalised advice from a professional financial adviser and your accountant before making any financial decisions in relation to the matters discussed in this article, including when considering tax and finance options for your business.