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How to handle business card expenses using accounting software

Summary

Using accounting software is a smart way to handle business expenses made on both your business and personal credit cards.

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Dear Your Business Credit,

When I first started my freelance graphic design business, I was between jobs and did not know if I was going to stay in business. But now that I’ve hit the one-year mark, I’ve built this into a full-time business and am planning to stick with it for at least the near future. I just formed an LLC online and opened a business bank account.

Now here’s my challenge: Because I didn’t know I was going to stay in business, I used my personal American Express card for business purchases. I just got a business credit card and am now using it for all business purchases.

I’ve just gotten set up with online accounting software. What is the easiest way to handle the entry of business credit card purchases? And how do I handle the handful of purchases made on my personal card in the past couple of weeks, as I was transitioning over to the new business credit card? – Denice

Dear Denice,

Congratulations on making it through your first year in business successfully.

Having the guts to get started is one of the biggest challenges for any entrepreneur, and winning those first few customers is tough – and you’re now well past those stages. I hope you have planned some celebrating!

I’m glad to hear you formalized your business by forming an LLC. It’s important that you keep your business and personal finances separate, and an LLC will provide some legal protection, so if a client sues you, it will be hard to go after your personal assets.

However, to maintain that legal protection, you need to keep your business and personal finances separate. Otherwise, someone could “pierce the corporate veil” and make the case that you and the business are one and the same.

Setting up your business bank account and business credit card, as you’ve done, are good ways to demonstrate your business is financially separate from you.

Check out all the answers from our credit card experts.

Ask Elaine a question.

Use accounting software to split personal and business card expenses

When it comes to accounting software, I’d suggest attaching your business credit card to your business bank account and having the transactions populate your expenses.

Based on my own experience, you will have to review and “approve” the details of the purchases, as the systems aren’t perfect. But this will generally save you a lot of time.

As for your purchases on American Express, I’d suggest manually recording them.

As long as they are legitimate business expenses and you have saved the receipts and documented their business purpose, your accountant is not likely to have any issues with a few purchases made on a different credit card.

Just make sure you document which credit card those business expenses were on, so there is no confusion for your bookkeeper (if you use one) and your accountant.

See related: 8 expenses you should never charge on a business credit card

Keep all business expenses on one credit card

Going forward, try to keep all of your business purchases on one credit card except in emergencies.

That way, if you fall behind on your bookkeeping, it will be easier to recall which purchase were business expenses and which were not and to document them correctly.

Over time, you’ll find that keeping good records of your business expenses, while not necessarily the most exciting part of your business, will be very helpful in determining things like whether a particular business pursuit is profitable – and worth the time to do right.

What’s up next?

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Published: July 2, 2018

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