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Business and personal finances mix like oil and water.  One of the easiest ways to keep the two separated is to maintain separate business and personal credit card accounts.  If the same credit card is used for both business and personal expense, it becomes a task to separate the two when recording a credit card statement.  Since business expenses are generally tax deductible, it’s important to be certain which expenses were business related at tax time.

When you use your business card only for business expenses, it’s much easier to identify eligible deductions and prove that they are legitimate deductions during an audit. When personal expenses are included, everything is brought into question.

As time goes on, memories fade, and the process becomes one of guesswork. There is nothing more frustrating at tax time than to have to go over a list of credit card transactions and try to untangle the business and personal expenses from months ago.

Programs such as QuickBooks can be synched to your business credit card account and can be programmed to assign most recurring expenses to the correct expense account.  If personal and business charges are mixed, this requires every expense item to be reviewed.

Another thing to remember is that keeping business expenses off of personal credit cards can protect your personal credit should the business get into financial difficulties.

If at some future time, you are looking for outside financing or investors, mixing personal and business expenses can very likely raise a red flag.  At the very least, it indicates a potential lack of control over the business that can throw the owner’s judgment into question.

At Ten Key Accounting Solutions we specialize in helping small business owners organize and maintain their accounting systems with efficiency and professionalism.  Contact us today for a free no-obligation analysis and quote.