Stop Mixing Business & Personal Finances: The Simple Separation Setup That Saves You Hours
Mixing business and personal spending is one of those things almost every owner does at first… and then it becomes a monster you feed forever.
It creates:
messy books
tax-time confusion
missed deductions
and that special kind of stress where you know your numbers are wrong but you don’t know where
Here’s my strong opinion: separating business and personal finances is the easiest “adulting upgrade” you can make in your business. It’s not about being fancy. It’s about making everything easier.
Let’s set it up in a way that still works if you’re human.
Why it matters (the real cost of mixing)
When you mix transactions, you pay for it in at least one of these ways:
more time (yours or your bookkeeper’s)
higher bookkeeping fees (because cleanup takes longer)
higher audit risk (because documentation is harder)
worse decisions (because reports aren’t reliable)
If your Profit & Loss includes personal Target runs and DoorDash, it’s not a Profit & Loss. It’s a scrapbook.
The clean separation setup (do this first)
1) One business checking account (only business)
This is where business income lands and where business bills get paid.
Rule: no personal subscriptions. No groceries. No “I’ll fix it later.”
2) One business credit card (optional but powerful)
A business credit card makes expense tracking way easier because business purchases are automatically grouped in one place.
Rule: if it’s on the business card, it better be business.
3) A method to pay yourself (so you stop “borrowing” from the business)
You need a consistent way to move money to your personal life:
Owner draw transfer (sole prop/LLC)
Payroll (S-corp)
Scheduled transfer if you’re not ready for payroll yet
This is the “release valve” that keeps you from swiping the business card at Costco.
“But I already mixed things” — here’s how to fix it without losing your mind
Step 1) Stop the bleeding
Today. Not next month. Not “after this busy season.”
Turn off personal autopay from the business account
Move personal subscriptions to a personal card
Stop using the business card for personal spending
Step 2) Pick your cleanup approach (choose one)
Option A: Reimbursements (simple + clean)
If you used personal funds for business expenses: reimburse yourself from the business account and label it clearly.
Option B: Owner draw (common, but document it)
If you used business funds for personal spending: classify it as an owner draw (or shareholder distribution for an S-corp), not an expense.
Option C: “One-time cleanup journal” (best if it’s a mess)
If it’s heavily mixed, do a cleanup pass once and then keep it clean going forward.
Step 3) Create two rules that prevent relapse
No personal spending on business accounts/cards
Any business expense paid personally gets reimbursed once a month (same day every month)
Consistency beats perfection.
What about the weird transactions?
Here’s how to handle the three most common “gray areas”:
Shared subscriptions (like phone/internet)
If it’s mixed personal + business, you can usually:
reimburse the business-use portion monthly, or
have the business pay it and record only the business % (depending on your setup)
Just don’t do “100% business” if it isn’t. That’s how you end up explaining Netflix to the IRS.
Meals
Meals have rules and documentation requirements. If you can’t explain the “who/what/why,” don’t run it through the business. Easy.
Mileage / vehicle expenses
Keep tracking separate. If you don’t track mileage, you’re basically donating deductions to the government. (Rude.)
Mini example
An owner runs everything through one checking account “because it’s easier.” January looks fine. By August, their P&L shows $9,000 of “Supplies” that includes personal Amazon orders, kid activities, and actual business expenses.
Once they separate accounts and set a twice-monthly owner draw transfer, bookkeeping time drops, reports become trustworthy, and tax prep stops being a forensic investigation.
If your books are mixed and you want them cleaned up (and kept clean), I can help you set the separation structure and build a simple process that fits your business.
Book a call: https://calendly.com/sara-dunhambookkeepingservices
