When you own a small business, it’s helpful to keep separate bank accounts. You don’t want to mix your personal and business banking information because it makes it difficult to keep proper track of your business income and expenses.
A bank account that’s strictly devoted to your business helps ensure that all of the expenses deducted from the account are business-related. This makes it a lot easier to determine whether a specific expense qualifies for a tax write off. For example, if you take a business trip and decide to extend the trip a few days to explore the area, part of your trip would be business and part of it would be considered personal. If you only used one bank account for your expenses during the trip, it makes it a lot harder to determine which expenses are business-related. But using a business and a personal account helps keep your finances separate, which in turn, simplifies your bookkeeping process later.
When tracking your finances, you should use your business account for all income coming into your business and expenses going out. Then, when it comes time to pay yourself, the money you earn should go into your personal bank account. And that’s the account you should use to pay your personal bills and expenses. It’s also a good idea to keep track of your income and expenses using cloud-hosted accounting software, such as QuickBooks Online. Cloud-hosted software typically connects directly to your business bank account, allowing you to view your business finances in real time.