How to Record Business Expenses Paid by Personal Credit Card

As a small business owner, you know that tracking your expenses can be a chore, especially if you’re doing it yourself. Making company purchases on your personal credit card is a great way to track spending while:

• Improving your consumer credit score
• Leveraging consumer protections not offered to business cards
• Taking advantage of a broader range of rewards programs

By using a personal card for business expenses, you run the risk of commingling your funds, increasing your credit utilization ratio, and negatively impacting your credit score. This is why it’s crucial to understand how to record business expenses paid by your personal credit card.

Recording Your Personal Credit Card Business Expense

Maybe you only use your personal credit card once in a while for business expenses — or you don’t have a business credit card, and you decide to invest in a large purchase with your personal card. 

You are fully aware you should show this investment as a company expense, but you aren’t sure how. The simplest way is to bill yourself using the software of your choice, including:

If You Have QuickBooks Online (Essentials and Above)

The following are steps to take if you do your bookkeeping using QuickBooks Online, Essentials, Plus, or Advanced:

• At the top of the page, click the “+ New” button and select the bill under the vendor’s column.
• Create a new bill: 
  • The vendor section at the top left is for you; add yourself. 
  • Fill in the bill date as the date the credit card purchase happened. 
  • The due date is the date you expect your card to be paid back by your company. 
  • The category should be the account you would use if you made the purchase directly through your company account. (i.e., travel, gas, etc.)
  • The description details should include the “what and where”: what was purchased and at what store or location (i.e., Staples for a new printer)
  • The amount is the cost of the item charged to your personal credit card
• Log into your business banking portal and make a transfer from your business account to your personal account. Make sure the total matches the amount that you charged. (You could draft a business check for yourself).
• Match the transaction to the bill when the transaction is processed through your bank feed.

Using Xero Accounting Software

If you use Xero accounting software, record your business expenses paid by your personal credit card by using these steps:

• Navigate to business and then to bills to pay

• Create a new bill: 
  • Fill in “to” as yourself
  • The date is the credit card purchase date
  • Type in the due date as the date you’ll be paid back by your business
  • The category will include the account you would use if you initiated the purchase through your company account
  • For the description detail, what and where you made the purchase
• Create a transfer from your business banking account to your personal credit card company or your personal banking account. Double-check that the amount matches the amount charged to your personal account. (You can also write yourself a check from your business account)
• Sync up the transaction to the bill when your bank processes it

Software that Doesn’t Have Bill Features

If you use bookkeeping software that lacks bill creation functionality (for example, QuickBooks Self-Employed or QuickBooks Online, Simple Start), you can still record business expenses made with your personal credit card: 

• First, generate a transfer from your business banking account to your personal account for the credit card purchase amount. 
• Then, be sure to categorize the expense properly once it shows up in your business bank account feed. 

For recordkeeping and auditing purposes, identify the transaction by noting in the memo line or description that you generated the payment to reimburse yourself for a business expense made by your personal credit card.

Expense Management Software

Consider expense management software if you have employees that frequently need reimbursement or if you operate a more substantially sized small business. These online programs will simplify your life so you can turn your attention to more important activities that will bolster your company’s bottom line.

Use this software for submitting expenses to be recorded and reimbursed and made through personal or non-business accounts including:

• Expensify
• Xero Expenses (part of the Established Plan)

Expense Management Software

Consider expense management software if you have employees that frequently need reimbursing or if you operate a more substantially sized small business. These online programs will simplify your life so you can turn your attention to more important activities that will bolster your company’s bottom line.

Use this software for submitting expenses to be recorded and reimbursed and made through personal or non-business accounts include:

• Expensify
• Xero Expenses (part of the Established Plan)

Using a Personal Credit Card for Business Purchases

Keeping your personal and business expenses separated simplifies your bookkeeping. And if you make your payments on time and use your card wisely, you can use it to significant effect to pay your company’s expenses.

One thing you’ll want to avoid is commingling business and personal expenses. An excellent way to prevent this is to designate a credit card for business purchases only — even if that card is your personal credit card. 

This way, you can avoid having to sift through your receipts or your credit card’s transaction feed to determine the purchases that were business-related and were not.

Ensure Your Recordkeeping Is Accurate

If you use your personal credit card to pay your business expenses regularly, be sure to record them accurately, using software or whatever method you choose.

For example, if you incur $200 in travel expenses and put it on your personal Visa, be sure to debit it to your travel expense account. Meticulous recordkeeping will satisfy the IRS in the event of an audit. 

Regarding any business purchases made with your personal credit card: the more information you can provide, the better. 

• Jot down information on your business receipts, including the transaction date and time and the people who were with you
• Use your smartphone camera or another app to photograph or scan your receipts and then archive the images on your cloud drive

Using Your Personal Credit Card for Business Expenses

Avoid mingling business and personal spending on one card. Even if you choose a personal credit card to pay for business expenses, don’t put personal expenses on it. This can lead to a bookkeeping disaster.

Revenue-Based Financing Works Differently

Traditional lenders like banks and other credit card companies look at a number of different factors when determining how much credit a business deserves. Usually, a large part of their decision making is based on the personal credit history of the business owner. Because of this, many business owners who have poor credit are unable to access capital through those companies. This is true even if their business is producing revenue or if the primary reason their personal credit score is poor is because they’ve used their own funding resources to build their business.

Revenue-based financing works differently. Instead of determining eligibility based on a business owner’s personal credit score, Revenued looks primarily at the revenue of the business itself. We purchase a portion of your future receivables at a discount in exchange for providing working capital to you when you need it fast.

The Revenued Business Card

The Revenued Business Card is not a credit card, it’s a purchase of future receivables and utilizes revenue-based financing to provide a prepaid debit card. Although not a credit card, the Revenued Business Card can be used for purchases in store or online similarly to a business credit card. Funding is delivered on a just-in-time basis as card transactions occur. Instead of looking at traditional factors like a personal credit score or business credit score, Revenued looks at your business revenue to determine eligibility. Because of this, it can be an excellent option for business owners who have a limited business credit history or a poor or fair personal credit score.

Unlike many credit cards, the Revenued Business Card does not require a hard credit inquiry, so there is no temporary dip in the credit score of the business owner. Additionally, the card’s spending limit increases with a business’ revenue, making it a great option for businesses who are seeing rapid growth and need access to more funding for their operations.

Learn more about Revenued by calling +1-877-662-3489  or emailing [email protected] today.