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Finances are complicated, especially with a business in the mix. Here's how to separate business and personal expenses.

There's nothing simple about running a business. As a business owner, you're in charge of every decision, from what services you offer and how much you charge right down to where you keep your business's money.

If you're a sole proprietor or part of a partnership, it's legal to mingle your business and personal finances. That doesn't mean you should.

Wondering how to separate business and personal expenses — and whether doing so will actually make your life easier or just add more to your workload? Keep reading.

Do you know how much your business earned last year? What about how much you spent on it? Do you know if you earned a profit, and if so, how much?

Financial metrics like these are vital in determining whether your business can truly hold water. When your personal and business finances are combined, it's much harder to assess your business's financial health at a glance, and that's not the kind of information you want to come with a waiting period attached.

If you're ready to separate your business finances from your personal budget, a good first step is to take advantage of business accounting software. Consider using a program like FreshBooks or QuickBooks to record your business revenue and expenses, even if you're still using your personal accounts to make the transactions. These programs make it easy to generate reports on revenue, profit, and costs, helping you track your business's financial health. 

Whether you run a law firm or an ice cream shop, maintaining a level of professional credibility is essential. This includes all the things you're probably doing already, such as creating a website and logo, staying up to date on your professional certifications, and always keeping business cards on hand. 

An often-overlooked step — and the final step in separating your business and personal finances completely — is to maintain separate business and personal finance bank accounts. Business bank accounts allow customers to make payments directly to their business. Opening a business bank account is easy, and most banks in Canada offer business banking options.

If your business is a sole proprietorship or a partnership, you can file your business and personal taxes together. To claim your business expenses, you'll need to hold on to your business receipts and keep running totals of your business spending in various categories like advertising and office supplies.

When your business finances aren't mixed in with your personal ones, though, your expenses are already halfway organized, which means you won't waste time hunting down that one office supplies purchase amidst your grocery store purchases and rent bills.

A straightforward way to keep your ducks in a row is to open separate bank accounts and credit cards for your business purchases. That way, any spending on the card can be directly logged in your business accounting software. Programs like the ones mentioned above will keep running tallies of your spending in different categories, which will make entering your business expenses a breeze come tax time.