Why Using Your Business Bank Account for Personal Spending Is a Big Mistake

If you're using your business bank account like a personal wallet, it's time to rethink things.
This is one of the most common—and costly—mistakes business owners make.

Groceries, takeaways, family holidays...
If it’s all coming out of your business account, you’re not just making your accountant’s life difficult—you’re putting your business at risk.

In this post, we’ll explain:

• Why mixing business and personal finances is a problem
• The impact on your books, tax, and cashflow
• How to separate your finances the right way
• A simple system to pay yourself properly

The Problem: Mixing Business and Personal Expenses

It might feel convenient to swipe the business card for personal expenses.
But here’s what really happens behind the scenes:

• Your financial records become messy.
  You (or your accountant) now have to sort through every transaction to figure out what’s business and what’s not.
• Your financial reports become unreliable.
  If personal expenses are in your profit and loss report, your business might appear less profitable than it actually is—or worse, you might miss signs of trouble.
• You could end up overpaying tax.
  Misclassified personal expenses may not be deductible, which can lead to overstated profits and a higher tax bill.
• Cashflow becomes confusing.
  You lose sight of how much money is actually available to run your business.

Why It Matters

When your numbers are unclear, you can’t make smart decisions.
You don’t know how much you can afford to invest, whether you need to cut back, or how your business is truly performing.

This lack of clarity causes stress, slows growth, and leads to poor financial decisions.

The Fix: Separate Business and Personal Finances

The solution is simple—but powerful.

Step 1: Open separate bank accounts

• One account for business income and expenses
• One personal account for your own spending

Step 2: Pay yourself a set amount regularly

Think of it like a salary.
Set up an automatic transfer from your business account to your personal account—weekly, fortnightly, or monthly.

Step 3: Run only business-related expenses through the business account

This includes costs directly tied to your operations—like software, marketing, inventory, wages, and rent.

Bonus Tip: Track Your Drawings or Salary

If you’re a sole trader or partnership, your payments to yourself are usually classified as drawings.
If you operate through a company, you’ll likely be paying yourself a salary or shareholder drawings.

Either way, tracking how much you take out of the business is crucial for:

• Tax planning
• Managing cashflow
• Ensuring your business remains sustainable

💡 Need help figuring out how to structure this? We can guide you based on your business setup.

Final Thoughts

Running your business and personal finances through the same account might seem harmless—but it’s doing more damage than you realise.

By separating your accounts and paying yourself properly, you’ll:

• Save time and money on accounting
• Get accurate, real-time financial insights
• Avoid unnecessary tax stress
• And actually know how your business is performing

Ready to take control of your finances and free up headspace?