Why Mixing Personal and Business Accounts Is Hurting Your Bottom Line

By Andy Mulholland

He has a background in leading a top real estate team for over a decade and an understanding of the critical role of clear financials, Andy, along with his wife Ellyn, a seasoned real estate CFO, co-founded Simple-Numbers.

If you’re a real estate agent or team leader, and you are still using the same bank account for both your personal and business expenses, then you are making a big mistake. Stop mixing your business and personal accounts. Here’s why it’s hurting your real estate business and can set you up for trouble.

The problem: You’re losing control of your finances. When you mix business and personal finances, it’s impossible to get a clear picture of your business health. How can you know if your business is profitable when you don’t know how much you’re actually spending on business expenses? If you keep personal expenses in the same account, you’re flying blind.

Think about it: every time a commission check lands in your account, it’s mixed up with personal spending. So when it’s time to figure out how much you’re actually making or how much you should reinvest into your business, you’re stuck guessing.

You’re wasting money personally, too. A lot of people don’t realize that mixing accounts can cause you to waste money. You might tell yourself, “This trip, this gadget, this new purchase is for my business.” But deep down, you know it’s personal. The problem is, since everything is in one account, it’s easy to convince yourself that it’s okay to spend more than you should.

It’s a slippery slope. You start to blur the lines between what’s necessary for your business and what’s just a personal indulgence. That’s a dangerous game to play, and it leads to financial chaos.

The IRS is watching. If you keep mixing business and personal funds, you’re opening yourself up to IRS audits. That’s right – the IRS doesn’t like seeing personal expenses mixed with business transactions. If they notice, you could end up facing penalties or, worse, an audit. Trust me, you don’t want to deal with that. So, make sure to separate your personal and business accounts. This will save you from a lot of headaches down the road. Here’s what you need to do

Set up a separate business entity. Talk to your CPA about setting up an LLC or S Corp. This will separate your personal assets from your business, protecting you and your money. Open a separate business bank account: Get a business bank account for all your real estate transactions. Keep your business income and expenses in one place and your personal spending in another. It’s simple, but it makes a huge difference.

By separating your finances, you’ll be able to see where your money is going. You’ll understand your profits, your expenses, and your return on investment. Plus, you’ll avoid the risk of an audit and save yourself from unnecessary stress.

If you want to grow your business and increase your profitability, stop mixing your business and personal accounts. Take the time to set up a separate account, and you’ll gain clarity on both your business and personal finances. If you have any questions about managing your finances in your real estate team or business, let me help you. I’d be happy to guide you to ensure you are not missing out on anything that will cause you to have trouble with the IRS.