Doerhoff reminds business owners that combining business and personal expenses makes it difficult to get an accurate picture of the financial health of the business.
(PRWEB) November 24, 2015
Bert Doerhoff CPA, founder of AccuBiz, responds to a recent 2015 TD Bank survey of small business owners, which reveals that 56 percent use a single checking account for both business and personal finances. In addition, 53 percent use credit cards in similar ways.
Doerhoff calls particular attention to the recent data because it’s a relatively common typical scenario that can cause tax problems and other issues for business owners. “There are several reasons that small business owners get started this way. It’s inconvenient to travel to the bank with the correct documentation and identification and open up a new account,” says Doerhoff. “Also, business owners generally want to invest their earnings right back into the business and personal checking accounts typically have a lower minimum balance than business accounts.”
Doerhoff reminds business owners that combining business and personal expenses makes it difficult to get an accurate picture of the financial health of the business. Monitoring cash flow is challenging on its own, and creating an accurate income statement may require a heavy time commitment – which can be even more significant when business and personal expenses combine.
While commingling finances is a common practice, it could have a broader negative impact on a business. For example, using only one checking account increases the tendency to consider personal items as business expenses, distorting the true profits of the business.
Other problems arise if a business owner decides to pursue new opportunities by selling the company. “While it is tempting to overuse expenses for tax deduction on the return, it can be a problem when it comes time to sell the business,” says Doerhoff. “At sale time, there is nothing to sell because the business is not showing a profit.”
There are notable benefits to setting up a separate business account. Businesses enjoy the ability to offer their customers payment options that may not be possible with a personal account. They are also offered relationship discounts and options for combining account balances to maintain minimum amounts in business accounts.
“People can’t have their cake and eat it, too. Run your business like a business and be aggressive with tax deductions. However, you need to know what the business makes and constantly make changes to make it more profitable,” Doerhoff says.
“The most valuable company is one that runs itself without the owner being involved on a daily basis. A business owner would never allow employees to run personal expenses through the business account, and they should apply similar guidelines to themselves.”
About Bert Doerhoff:
Bert Doerhoff, CPA, works closely with small business owners to minimize income tax and fill the gaps so the owner has more time to work on the customer centered core services. Doerhoff and his team can outsource all functions of an accounting department, from bookkeeping to CFO services. The CPA firm has multiple QuickBooks advisors to help clients maximize the benefits provided by their accounting system. Doerhoff is co-author of Six Steps to Small Business Success available on Amazon. Contact Bert Doerhoff, CPA, by email at bdcpa@AccuBiz.net; by phone at (573) 634-4006; or learn more at http://www.AccuBiz.net.