Best Business Practices for Photographers [96]
Although the reimbursement via check is the cleanest and fits the "best business practices" bill, in the end every photographer I know uses the ATM when he or she needs to. If you're not listing these as a draw, you've got to list them as something, and I find this to be an effective way for me, personally, and my business to handle cash expenses between us.
Separate Bank Accounts: Maintaining Your Sanity and Separation
One of the first things your accountant will tell you is that you and your business must have separate bank accounts. In the event of an audit, the IRS takes a dim view of co-mingled funds and expenses, and it's just a bad business practice to keep both accounts together.
Further, when bank fees are charged to you—monthly maintenance fees, bounced check charges, and the like—when the account is strictly for business purposes, those bank fees are a deductible expense. If the accounts are co-mingled, then allocating what part of the fees are personal and what are business is next to impossible, and to be safe, you'd do well to attribute those fees as a nondeductible expense. One new solution is to change from writing checks to many companies you do business with, and instead use a debit card, which is handled by the store as a credit card, but debits your account for the exact purchase amount.
Lastly, you'll be getting checks made payable to your business, not you. For me, clients cut checks to my business—John Harrington Photography—and I have a "dba" on my business checking account. My bank classifies this as a personal account (in other words, it's handled not by the bank's business division, but by their consumer division). This was the original account I used when I started business, and I was able to add the dba (which stands for "doing business as"), which allows me to deposit into that account checks made payable to me—John Harrington—when a client cuts the check just in my name (although I try to avoid this happening), as well as checks made payable to John Harrington Photography. If you don't have a dba on your account, you won't be able to deposit checks made out to your unincorporated business.
When you are trying to balance or reconcile your bank statements every month, knowing for sure that all the checks and deposits to that account are business-related gives you piece of mind. It also means that your spouse won't be writing a check that drops your account total below what you thought you had, so that you inadvertently bounce a check to a vendor, and as a result they put you on a C.O.D. basis for a period of time, plus charge you a large bounced-check penalty (consistent with their policy).
Separate Credit Card: Deducting Interest Expense and Other Benefits
Just as with separate bank accounts, a credit card is a form of a loan, and keeping loans for the business separate from loans for personal uses is critical to maintaining a proper accounting system. One of the big reasons is that, for credit cards, if all your expenses are business-related, and for some reason you don't pay off the bill in the same month, or if you incur a large expense, knowing you will have to pay it off over two months, the interest expense for that carried-over balance is deductible because all the expenses on the card are for the business. If you had personal purchases on the card, allocating the interest to the personal and business expenses properly would be a nightmare and not worth the time or hassle. Further, you can deduct the annual credit card fee as