There’s one major drawback to business credit cards, you can’t use them for personal expenses. It’s an issue that can prove to be a sticking point for new businesses as company owners get to grips with what is and isn’t permissible, especially as the two can overlap.
The key difference
Almost anything that’s a business expense can go on a business card. Any office-related expenses such as furniture, computers, cleaning supplies, and rent are all allowed. Purchases made in the pursuit of the business’ operation can be considered a business expense.
This can include typically personal or leisure expenses, such as going for a meal or paying for a vehicle. The rule of thumb is that the money spent on the expense must be done in line with business needs, if that’s not the case then it’s a personal expense.
It is possible that business owners may use their business card for personal expenses but it’s not a good idea to let that happen. For one thing it makes tracking your business costs more difficult as you’ll need to reimburse the business for the money spent and you won’t be able to receive any exemptions on the money.
However, if your business is based on working from home then you’re able to expense costs - partially at least - to the business that would ordinarily be considered personal. This can include your rent, council tax, insurance, plus tea and coffee. It’s often only a partial amount that can be expensed to the business so it’s best to consult your accountant on these particular issues.
Luckily, Cape’s business credit cards come equipped with the capability to export your business transaction data into accounting software with a click, making it simple for your accountant to review your transactions.
Separate your finances
The best way to stay clear of any nasty surprises around business expenses is to make sure that your business and personal finances stay separate. The simplest way to do this is to pay yourself a salary from the business on a monthly basis just as you do for the rest of your employees on payroll.
It can be comforting to look at the revenue of your business and consider it as your own money, but it’s there for the benefit of the business as a whole. Paying yourself a salary will keep your accounts balanced and give you a greater understanding of the financial health of the business.
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