Internal transfers
Why your income is wrong when you own more than one company
A transfer from your company to your own account isn't income. But a tool that sees only one side of it counts it as income where it lands, and as an expense where it left. In the sample data, three companies and a household over twelve months, that turns $684,200 of actual income into $808,600.
Where the double count comes from
Owning more than one company means money moves between accounts that are all yours. One company covers another’s costs, cash goes to wherever a bill is due, a company pays you. None of that is new money. It’s the same dollars changing accounts.
Here is one month of the sample data. Two of these five lines are transfers between accounts you own:
| Date | Entity | Description | Category | Amount |
|---|---|---|---|---|
| Mar 04 | Ridgeline LLC | Meridian Group, client wire | Client revenue | +$42,800 |
| Mar 11 | Ridgeline LLC | Ridgeline LLC → personal checking | Internal transfer | |
| Mar 18 | Fourth Street Co | Fourth Street Co → Ridgeline LLC | Internal transfer | |
| Mar 22 | Ridgeline LLC | AWS, infrastructure | Uncategorized | −$2,140 |
| Mar 26 | Fourth Street Co | Halstead Partners, invoice 2041 | Client revenue | +$16,250 |
Look at the $25,000. It leaves Fourth Street Co and arrives at Ridgeline LLC. Ridgeline LLC’s account shows a deposit, so anything that adds up deposits counts $25,000 that no client ever paid. The $18,000 sent to your personal checking is the same story one level up: your personal app sees money arriving, and counts it again.
Across twelve months, transfers like these come to $124,400:
| What your tools add up, 12 mo | $808,600 |
|---|---|
| Your own money, moved | −$124,400 |
| What's actually yours | $684,200 |
If you add every account together yourself, the bottom line still adds up. Every transfer counted as income at one end is counted as an expense at the other, so across all your entities the balance comes out right and nothing looks broken. What’s wrong is everything above it: income and expenses are both $124,400 too high, and any margin you work out from them is off.
For a single company it doesn’t even cancel out. Counted as income, a company that received more from your other companies than it sent looks more profitable than it is, and the one that paid looks less.
You don’t need several companies for this. One company and a household is already two sets of books, and the money you pay yourself is counted as income twice: once by the company that earned it, and once by the account it lands in.
Why accounting software and budgeting apps both miss it
Accounting software keeps the books of one company at a time, in separate files. Each set can be accurate about its own company, and none of them adds your companies together, let alone with your household. Consolidation tools exist, but they’re built for finance departments, they cost more than your bookkeeper, and none of them know your household exists.
Personal finance apps see the household and nothing behind it. A distribution from your company arrives in personal checking as income, though it was already counted once, as the company’s.
The spreadsheet that adds it all together is the usual fix. It’s current only for as long as you keep it current, so it’s wrong again the moment you take a distribution or cancel a contract.
What changes when you count it once
Perpetory reads the statements of every company you own and of your household, and knows which accounts are yours. A transfer between two of them is recognized from your own account numbers and excluded from both sides, income and expenses. It’s on by default, and every screen assumes it.
What’s left is what actually happened. In the sample data that’s $684,200 of income, $594,200 of expenses and $90,000 kept, which is $7,500 a month. Free cash flow, fixed costs and debt are worked out the same way for each company and for all of them together, and that $7,500 a month is the pace the Goal module uses to tell you the year work becomes optional.
The demo on the home page has the switch. Turn off excluding internal transfers and the income figure goes back to $808,600. See it on sample data →