Should I Open a Business Bank and Credit Card Account ?

Separating your business transactions from your personal spending and keeping them in separate bank accounts, is just as important as separating your business life from your personal life. My experience is that if you can't separate your business from your personal life, then you most likely will be unable to maintain two separate bank and credit card accounts. However, If you can make the separation, the simplest way to begin the separation, is to have a separate business cards. That's easy, but the hard part is to be consistent and to use the correct credit card for each business or personal transaction.

The benefits of separate bank and credit card accounts:

• A separate business checking account allows you to write and deposit checks, transfer money electronically, and sometimes provide you access to a business debit card in one account dedicated to your business.

• Separating your accounts allows you to easily monitor your business transactions and to prepare business and cashflow budgets.

• By connecting your QuickBooks bank and credit cards and using e-commerce you will see and be able to monitor in QuickBooks how each dollar spent with Amazon or to other e-commerce platforms. Even though the e- commerce transactions may contain micro transaction, the volume makes the total dollar amount large and important to track each transaction one by one .i.e. by vendor, item purchased, etc.

There could be legal issues resulting from not separating your business from your personal transactions. Consult your attorney for more.

As e- commerce transactions become smaller and the volume of these transactions increase as your business grows, e-commerce charges, e-commerce returns/refunds/fees/expenses will complicate your accounting if not handled correctly. In other words, if this process isn’t automated, recording and reconciliation requires hundreds of manual data entry and analysis, can result in errors and create a huge bookkeeping mess. More importantly, you should understand it's not correct to record these payments as an "Amazon payment", each Amazon payment needs to be categorized.

In summary, by using a separate business bank account, it easier to view and share your financial information, prepare taxes, and generate financial statements and to run your business. Having a report that separates your business from your personal will incredibly help you assess your business’s financial status, predict cashflow and just make your life easier.

A Contrarian Alternative

As you can see, I am a big proponent of separating your business transaction from personal transactions, but if you are a sole proprietor and file a Schedule C, you may want to consider using QuickBooks Self-Employed, that works for any small business that chooses not to set up two accounts. I helped my daughter set it up her business with one account, and she loves using QuickBooks Self-Employed, from her smart phone. This scaled down QuickBooks application helps freelancers and gig workers, keep track of income and expenses, as well as calculate and pay estimated quarterly taxes. For me, I am not crazy about it because it lacks the ability to reconcile your bank balances, there is no balance sheet and lacks the system of double entry.