Business vs Personal

Guide 12: Business vs Personal

Track business and personal finances in one app

Overview

OtterLedger excels at tracking both personal and business finances together. Whether you're a freelancer, consultant, or small business owner, you can see your complete financial picture while keeping business expenses organized for taxes.

What you'll learn:

• Organizing accounts for business and personal
• Categorizing business expenses
• Separating business income
• Tax-ready reporting
• Best practices for mixed finances

Time required: 15 minutes to set up

Prerequisites

• OtterLedger file created
• Understanding of what expenses are business-related

Why Track Both Together?

Benefits

• Complete picture - See all money in one place
• Simplified tracking - One app instead of two
• Cash flow visibility - Understand personal draws from business
• Tax preparation - Filter business expenses easily
• Reimbursement tracking - Track personal purchases for business

The Reality for Freelancers

Most freelancers and consultants don't have completely separate finances:

• Business income goes to personal checking
• Personal credit card sometimes used for business
• Home office is partially business, partially personal

OtterLedger handles this reality gracefully.

Setting Up Business Tracking

Option 1: Separate Accounts (Recommended)

If you have dedicated business accounts:

Create business accounts:

1. Business Checking
2. Business Savings (if applicable)
3. Business Credit Card

Keep personal accounts separate:

1. Personal Checking
2. Personal Savings
3. Personal Credit Cards

[Screenshot: Accounts view with Business and Personal groups]

Option 2: Mixed Accounts

If business and personal transactions are in the same accounts:

1. Use your existing personal accounts
2. Tag business transactions with "Business" tag
3. Use business categories for business expenses
4. Filter by category or tag for reports

Option 3: Hybrid Approach

Many people use:

• Separate business checking
• Mixed personal/business credit card
• Personal savings for everything

Set up accounts to match your reality, then use categories and tags to track.

Business Categories

Setting Up Business Categories

Go to Categories and create business-specific categories:

Business Income
├── Client Income
├── Product Sales
├── Consulting Fees
├── Reimbursements
└── Other Business Income

Business Expenses
├── Advertising (Line 8)
├── Car & Truck (Line 9)
├── Contract Labor (Line 11)
├── Insurance (Line 15)
├── Office Expense (Line 18)
├── Professional Services (Line 17)
├── Software & Subscriptions
├── Travel (Line 24a)
├── Meals (Line 24b)
└── Other Expenses

Map to Schedule C Lines

For each business expense category:

1. Click the category → Edit
2. Set Tax Line to appropriate Schedule C line
3. Save

This enables automatic Schedule C report generation.

Tracking Business Income

Recording Client Payments

When you receive payment for work:

1. Add Transaction
2. Date: Payment date
3. Payee: Client name
4. Amount: Positive (income)
5. Account: Business Checking (or where deposited)
6. Category: Business Income:Client Income

[Screenshot: Business income transaction]

Using Invoices

For better tracking, use OtterLedger's invoicing:

1. Create invoice for client
2. Send to client
3. When paid, record payment against invoice

See Guide 13: Invoicing Basics.

Tracking Business Expenses

Recording Business Purchases

When you make a business purchase:

1. Add Transaction
2. Date: Purchase date
3. Payee: Vendor name
4. Amount: Negative (expense)
5. Account: Account used to pay
6. Category: Appropriate business category

Mixed Personal/Business Purchases

If one purchase has both personal and business items:

1. Create transaction for full amount
2. Click Add Split
3. Split between personal and business categories

Example: Office store purchase $125

• Office Supplies (business): $85
• Personal Items: $40

[Screenshot: Split transaction between business and personal]

Business Use of Personal Items

Home Office Deduction

If you work from home, track:

1. Total home expenses (rent/mortgage, utilities)
2. Business use percentage
3. Create monthly entries for business portion

Example: Home expenses $2,000/month, 20% business use

• Create monthly transaction: -$400 to "Home Office" category
• Or track full amounts and calculate percentage in reports

Vehicle Expenses

Two methods:

Actual Expenses:

• Track all car expenses (gas, insurance, repairs)
• Calculate business percentage
• Split each expense or track separately

Standard Mileage:

• Use OtterLedger's mileage tracker
• Record business trips
• Mileage report calculates deduction

See Guide 17: Mileage Tracking.

Personal Draws

When you transfer money from business to personal:

Record as Transfer

1. Create transfer from Business Checking to Personal Checking
2. OtterLedger categorizes as Transfer (not income/expense)
3. Doesn't affect profit calculations

Owner's Draw Category

Some prefer to categorize draws:

1. Create category "Owner's Draw"
2. Record transfers with this category
3. Filter out in profit reports

Separating in Reports

Profit & Loss Report

1. Go to Reports → Profit & Loss
2. Filter by business categories only
3. Shows business income vs. business expenses

[Screenshot: P&L filtered to business categories]

Personal / Business / Both Filter

Reports in the Report Gallery now include a Personal / Business / Both filter dropdown. Select 'Business' to see only business transactions, 'Personal' for only personal, or 'Both' for everything. This applies to most reports including Profit & Loss, Spending by Category, and Income vs Expense.

See also: Guide 26: Report Gallery for an overview of all available reports and filter options.

Schedule C Report

1. Go to Reports → Schedule C
2. Shows all expenses mapped to tax lines
3. Ready for tax preparation

Using Tags

Create tags for additional filtering:

• "Business" tag on all business transactions
• Filter any report by this tag

Handling Reimbursements

When You Pay Personally for Business

1. Record expense in personal account
2. Use business category
3. Add tag "Reimbursable"

When Business Reimburses You

1. Create income transaction in personal account
2. Category: "Reimbursement"
3. Reference original expense in memo

Tracking Outstanding Reimbursements

1. Filter by "Reimbursable" tag
2. See what hasn't been reimbursed yet

Best Practices

Financial Hygiene

1. Separate accounts when possible - Open a business checking account
2. Consistent categorization - Always use proper business categories
3. Document everything - Attach receipts to business expenses
4. Regular review - Check categorization monthly

Tax Preparation

1. Use tax-mapped categories - Set Schedule C lines
2. Track mileage - Use the mileage tracker for vehicle deductions
3. Reconcile quarterly - Don't wait until year-end
4. Export for accountant - Run Schedule C report before filing

Record Keeping

IRS requires records for 3-7 years:

1. Back up your OtterLedger file regularly
2. Attach receipt photos to transactions
3. Keep bank statements for reference

Tips for Common Situations

Freelancer with 1099 Income

• All client payments go to Business Income
• Track all business expenses with proper categories
• Run Schedule C report at tax time

Consultant with Reimbursed Expenses

• Track client reimbursable expenses
• Mark with "Reimbursable" tag
• Clear tag when reimbursed

Side Business with Day Job

• W-2 income is personal (not business)
• Side business income is business
• Keep business expenses separate from personal

Etsy/eBay Seller

• Sales income to Business Income
• Cost of goods to Cost of Goods category
• Platform fees to business expenses
• Track inventory if significant

Troubleshooting

Q: My profit is too high/low

A: Check:

• Are all business expenses categorized correctly?
• Are personal expenses accidentally in business categories?
• Are all income transactions recorded?

Q: Schedule C report missing expenses

A: Verify expenses have:

• Business expense category
• Tax line mapped on category

Q: Transfers showing as income/expense

A: Use proper Transfer transaction type or Transfer category.

Q: Can't tell what's business vs. personal

A: Add "Business" tag to all business transactions, then filter by tag.

What's Next?

Expand your business tracking:

• Guide 13: Invoicing Basics - Bill clients professionally
• Guide 17: Mileage Tracking - Track vehicle deductions
• Guide 18: Schedule C Report - Generate tax report
• Guide 16: Vendor Management - Track 1099 vendors

Need help? Visit the OtterLedger community at github.com/openledger or check the FAQ.