Can I buy personal items from my business account?

Can I buy personal stuff from my business account?

Can I buy personal stuff from my business bank account?

It’s a question that we get asked quite a lot.

In fact it’s a question I wish more people would ask, as there’s a very simple answer to this one.

Yes you can, but please don’t!

It can be very tempting to get the business bank card out when your personal account is running low, or even to use the business account like your personal bank account, after all, it’s where the money comes in.

But there are some good reasons why you shouldn’t buy personal items from your business account

It’s confusing

It might all make perfect sense to you now, but will your accountant or bookkeeper be able to work out what was business and what was personal. In fact in a few months, will you? One Amazon or Ebay transaction looks very much like another! What you end up with in your accounts might not be a true reflection of your business.

It also clouds issues that you may be having with your business such as cash-flow. When money gets tight you don’t know whether it was a real business issue or just you playing the “big spender”. It’s impossible to budget either in your business or in your personal life if they’re all mixed up.

It wastes time

Many cloud accounting systems have a direct bank feed designed to save you time by pulling in your bank transactions automatically, making it easier for you to record them. It defeats the object if you then have to waste your time dealing with all the personal transactions.

Even if you don’t have a direct bank feed, you or your bookkeeper will be wasting time inputting personal items to be able to reconcile the bank account.

It’s expensive

If you have your books done for you, and your accountant or bookkeeper has to spend hours inputting extra transactions and unpicking business versus personal, the chances are that they’ll charge you for it. Even if you do your own books, as a business owner, time is money for you too.

It could also end up costing you more in tax. Accountants always have to be conservative with their judgement, so tend to operate to the principle, “if in doubt, leave it out”. If I start seeing a lot of personal transactions, I then start to question anything that looks remotely personal. Keep it clean, business only and it will be cheaper.

But you need to live.

So how do you buy the things that you need, when you’re self employed?

The answer is to treat the business as a separate from yourself and take the money out rather than paying for the personal items.

How the money you take out gets treated in your accounts will be different depending on whether you are a sole trader or a limited company (it might be salary, dividends or drawings). But in terms of physically taking the money you need, the method is the same:

Make a bank transfer or if not then a cash withdrawal.

Take a big lump in one go, ideally monthly, rather than lots of little ad-hoc transactions or transfers.

Make sure the business can afford what you’re taking.

There’s lots more that can be said around this topic such as how you work out how much to take and the differences between sole traders and limited companies, but I think that’s enough for today. I’ve already got some posts that cover some of this and it’s maybe another topic for the future.

To summarise, you want your business finances to be easier, cheaper and clearer, then remember business spending only from the business account.

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