by Vanessa Sweeney, Practice Manager
If you are operating a company, partnership or Trust, you must have a separate bank account for tax purposes. If you’re a sole trader or setting up your own business, opening new bank accounts for it may seem like one more headache that you don’t need. But separating your business and personal finances from the start can save you time and money later, here’s 3 reasons why.1. Easier for you, easier for your accountant
If you have a separate bank account for business transactions, you won’t need to spend time later sorting out which transactions are for personal items and which relate to the business (or pay your bookkeeper or accountant to do it). When it comes to your tax obligations, your Activity Statements will be easier to complete and refunds for GST and deductions for business expenses are less likely to be missed.
2. Better planning and reporting
Having your personal and business finances together in the same account makes it harder to identify which funds are for the business, which can prevent you from making good business decisions. Your bank balance might look great, but how much of that is personal funds, and what should be put aside for future expenses and liabilities? A separate bank account will aid in cash flow management, make it easier to gather the data needed for reporting and budgeting, and simplify finance applications.
3. You’ll look more professional
Having a business bank account to transact from and for payments to be made into will help your business look more professional and established to your customers.
If you’re ready to open a business bank account, a good place to start is the financial institution you already use, they may have a range of business banking products to suit your needs.
Some things to consider when choosing a business banking provider:
Online banking platform – Transacting electronically can be time consuming, you’ll need an online banking platform that is easy to use and extract data from. If you make a lot of payments, the functionality to import batch payments and payroll from your accounting system may be important.
Integration with accounting software – Many accounting software packages can receive bank transaction information as a direct feed, removing the need to upload or manually enter banking data.
Number of accounts – you may wish to consider opening a separate business savings account for capital expenditure and future obligations such as tax that you can transfer funds to regularly, or set up a credit card for on the spot business purchases.
Fees and charges – such as EFTPOS, credit card and transaction fees can vary between accounts and financial institutions. Some fees may be charged per transaction so the number and type of transactions you are likely to need should be considered.
Need more advice? Please contact us to discuss your specific circumstances.