For many years I had a single bank account for everything; my savings, my business and day-to-day living costs. When it came to BAS and tax time I would kick myself for not having structured my finances differently. Sorting a year (or more!) of rounds at the bar from legitimate business expenses isn’t most people’s idea of a good time.
Fortunately you don’t have to drag yourself into a soul-crushing queue at a branch to open a new account. One thing banks actually manage to do well is allow you to open up a new account online in a few clicks.
If you chose to go with your current bank your personal details should already be on record and further identification checks won’t be necessary.
However if you feel you’re getting a raw deal and want to jump ship do spend 10 minutes on Finder to compare the best accounts from all Australian banks.
It’s worth noting your new business account doesn’t have to be an official “business bank account” offered by most banks, any regular transaction account will do the trick.
Once your account is up and running, putting it into practice is very simple.
1. Get paid into the new account
Update your invoice payment details to reflect your new account. Now all your credit transactions will only be relevant to your business and not tangled with any personal transactions, such as a friend paying you back for dinner.
2. Only make business purchases using your business account
Diligence is required here but it’s important to only pay for things from this account that are legitimate business expenses. Mixed expenses that are used for both business and personal reasons such as phone or utility bills should also be paid from this account. Be sure to update your online subscriptions to use your new debit card and amend any direct debits you may have created.
3. Connect your business account to accounting software
Once your business bank account is connected to accounting software like Rounded, reconciling transactions against invoices and business expenses becomes trivial. Reconciling an entire quarter should only take a matter of minutes. Having a clean stream of bank data entering your accounting software makes lodging accurate BAS and tax returns very simple.
4. Pay yourself into your personal account.
Your original account is now to be used solely to fund your day-to-day living and personal expenses. Try to transfer yourself a wage from your business account once a month as spending money.
Opening a separate account for your business can reap huge benefits when it comes to managing your business and personal finances and will certainly make life easier when it comes to tax time.