Personal and Business Finances Should Be Kept Separate - A Bookkeepers POV

Commingling personal and business finances is a common startup trap. Many business owners fund their venture using personal bank accounts, credit cards, or family loans, without opening separate accounts or loan paperwork for the company. This creates confusion, makes tax season stressful, and prevents clear financial reporting.

Sometimes, with the lack of clarity and boundaries that comes with commingling accounts, you might think that the business money is your money to do what you please with. You might use the company money to go on vacations, pay for meals, remodel your house, or put money down on a house. While that feels good for you, it is "stealing" from your company. If an employee did that, you would fire them.

Budgeting also gets muddy when you don't have a clear view of your business financials. When personal expenses bleed into your books, you can’t accurately measure profitability or make smart business decisions. It becomes difficult to know what you can afford, since you are draining your company funds for things that are not related to doing business.

What I recommend for best bookkeeping practices: Treat your company like a real business from the beginning. Open the four STOP™ bank accounts, use the EPI™ formula to calculate your salary and then only pay yourself that. Do not take random draws or run personal expenses through the business accounts.