How to handle business card expenses using accounting software
Elaine Pofeldt is a journalist whose articles on entrepreneurship and careers have appeared in Fortune, Working Mother, Money and many other publications. She is a former senior editor at Fortune Small Business magazine and an entrepreneur herself, as co-founder of 200kfreelancer.com. Her book, “The Million-Dollar, One-Person Business,” was released in 2018. She writes "Your Business Credit," a weekly column about small business and credit, for CreditCards.com.
How can I use online accounting software to handle business expenses made on both personal and business cards?
Attach your business credit card to your business bank account and have the transactions populate your expenses automatically.
As for those business expenses made on your personal card, I’d suggest manually recording them.
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
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.
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.
Tip: Using your personal card for business expenses can be a bad idea. Having cash flow problems or needing to have a higher credit limit are two of six reasons entrepreneurs should get 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.
- How to calculate 'total revenue' when a business accepts credit cards – If your business accepts credit cards, credit card processing fees won't affect the 'total revenue' of a transaction -- but they do affect your 'profit.' Here's how to enter card processing fees in your books ...
- How to deal with business credit card debt from startup partnership fallout – Dealing with business credit card debt following a startup partnership gone wrong? Start by seeking legal help. If you're personally responsible for the debt, you may have to make minimum payments on the card until the matter is resolved ...
- Options to reduce employee gas expenses on company card – If you run a small business and your employees are charging gas on the company card more than they should, you have options. Here are three ways to encourage employees to spend less on gas ...