While on the surface, your business banking may look as simple as choosing the right bank, there are many other things that must be considered. Here are the 5 most important aspects your accountant wants you to know about your business banking:
1. Separate personal and business
Always ensure your personal income and expenses remain separate from the business ones by utilising different accounts. Not only does this make your book-keeping/tax easier and faster to process, but it also allows your accountant (and yourself!) to quickly identify when something is not quite right and find workable solutions.
2. Choose electronic payment rather than cash
Where possible, opt for electronic direct payment rather than cash. Not only do the ATO have measures in place which can identify when a business is not reporting cash income, but it can also become an inconvenience to deposit or withdraw cash and coins at your local branch, for both you and your clients. Offer your clients alternatives such as EFTPOS, PayPal, Stripe or Square. The more convenient and effortless it is for your clients/customers to make payment, the quicker you get paid.
3. Your bank balance is not what is available to spend
That amount of money steadily growing in your bank account, is not always what it seems. While it may appear to be a little nest egg that can be used to purchase the new desk and chair combination you saw on special last week, you must keep in mind the difference between cashflow and profit. Not sure on the difference? Read up on it here.
4. Regularly put aside money for your taxation obligations
Following on from the point before, rather than waiting for the unexpected GST bill at the end of the quarter, transfer the amount you have received in GST into a separate account. Ask your accountant what extra percentage you should be putting into this account to cover your other taxation obligations such as PAYG, superannuation and end of year tax. Once this is reconciled at the end of the year, you may find yourself with a few bonus funds left over.
5. Choose a bank that will grow with you
In a digital world where physical currency is becoming less common, will your bank grow with you into a cashless society? Can you set-up debit cards with strict sales limits for staff to use in relation to day-to-day business expenses (such as Petty Cash)? Can this card be linked to your everyday account? Check your bank has the capacity and ability to grow with the future direction of your business BEFORE you set-up your accounts to save yourself a headache later.
There are many other things to consider for your business banking such as overdraft limits, fees, interest rates and the general accessibility of your bank’s branches. These, however, will be very specific to your individual circumstances. But, from the outset, the considerations listed here are the five most important aspects your accountant wants you to know about your business banking.
At VBA we specialise in strategic tax advice, offering tax and financial reporting for individual income earners, family businesses, tradies and construction companies.
Victor Bimrose Accountancy Pty Ltd (ASIC No. 1259423) ABN 53 010 957 294 is a Corporate Authorised Representative of Merit Wealth Pty Ltd ABN 89 125 557 002, Australian Financial Services Licence Number 409361.
Mark Foxley-Conolly (ASIC No. 1259421) is a Limited Authorised Representative of Merit Wealth Pty Ltd ABN 89 125 557 002, Australian Financial Services Licence Number 409361
General Advice Warning: This information has been prepared without taking into account your objectives, financial situation or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs.