Separating Your Business & Personal Finances

Why is separating your business and personal finances so important?

Though there are a myriad of reasons as to why you should separate your finances, the most important are: audit proofing your business, clarity around your numbers, and saving time and money.

Separating your accounts makes keeping track of your business expenses streamlined and efficient. It can save you money on bookkeeping and accounting fees by setting, and keeping, good banking habits. Your bookkeeper and accountant are then able to focus their time on actual business income and expenditure, rather than spending valuable time sifting through non-deductible personal costs.

Most business expenses may be tax deductible, but if your personal and business expenses are mixed in together, it is possible you may miss out on valuable tax write-offs.

In the case of an audit, tracking and validating your business expenses will be quick and efficient, meaning you can approach an audit with confidence and assurance. In our experience, where a tidy and reconciled set of accounts can be demonstrated to the auditor, you have shown you are compliant, and therefore a lower risk.

According to the ATO, if you are a partnership, company, or trust, your business and personal expenses MUST be kept separate.

When you have separate accounts, you allow yourself a far more organised financial picture, making tracking your spending, and other financial processes, streamlined. When running reports, you can accurately see the health and financial position of your business.

Therefore, our recommendation is to isolate your business expenses from your personal spending through using separate bank accounts and credit cards. That way, when making financial business decisions, you know you have a set place to use.

The longer you leave both expenses in the same account, the more they build up, and it becomes exponentially harder to determine what your profit and expenses are for your business. So, start today to instigate good data hygiene habits!