Regardless of the business structure you choose in Australia, it is recommended to have a separate business bank account. From clearer business finance tracking to easier banking, separating business finances from your personal finances offers many benefits. This blog provides a detailed guide on it.
Here we discuss six key reasons business experts recommend separating the two finances.
If your office and grocery purchases are included in the same bank statement, you will find it tough to analyse how your business is performing and where all the income is spent.
In the case of a sole trader, owners have the option to run their business using a personal bank account. It means they can only get an idea of their business performance from their bank balance. It creates a lot of confusion because they cannot easily understand whether they or their business is spending the money present in the account.
Running your business through a personal account also makes the accounting process time-consuming.
That is where having a separate business bank account proves beneficial. It will only record your business ingoings and outgoings, including income, expenses and profit.
These numbers will help you make informed decisions about investing money and reducing costs. In addition, accounting has also become faster.
As a business owner, you will be required to pay tax at a specific time of the year. There are several taxes that Australian business owners have to pay, including income tax, GST, PAYG instalments, FBT, etc. Since taxation is a daunting process, it requires the proper assistance of a registered tax consultant for managing and maintaining records.
If you want to avoid any audits at the time of taxation, it is better to have a minimum of two business bank accounts:
Once you set up these two accounts, consider using electronic transactions. It offers more convenience and accuracy compared to cash-based transactions. Digital transactions will also help you keep your essential receipts safe. Even if you forget about any payment, you can check and find the transaction.
As a business owner, you can claim tax deductions for certain expenses your business has incurred. Having a separate bank account for your business will help you avoid missing out on claiming tax deductions and wrongly claiming personal costs. If the Australian Taxation Office (ATO) requests any information and wants to carry out an audit, you can quickly check the business bank account statements.
On the other hand, when you do business through your personal account, it will be challenging for you to locate the exact information the ATO wants.
Keeping all the things clear will also help you save accounting fees and allow your accountant some more time to finish all the more valuable tasks for your business.
It is always recommended to consult a financial advisor if you need help with financing.
Your business will grow with time, and you will have to fulfil more responsibilities. Considering this situation, it will be better to have an easier and faster banking transaction system.
You may register for online banking. It will allow you to transfer some money from your savings account to another without any difficulties. In addition, your invoicing will also be simpler.
When you have a separate bank account for your business, you can reduce the time spent in several ways.
It will become much easier to arrange your account books in order. Thus, you will not be required to spend considerable time determining which transactions are associated with your business and your personal expenses.
Using a cloud-based accounting platform also reduces time. It happens because many of these accounting packages can integrate with the bank account, thus automating the task of bookkeeping. For example, if you use software such as MYOB, Xero, etc., you can connect it to a NAB Everyday Business Account. It also does not involve any monthly fees.
Opening a separate business bank account is not a daunting task, so you must consider it at the very beginning.
On the other hand, if you begin with a personal account and then decide to switch it to a business account, there will be many things to do. All your customers and suppliers must be informed about the changes in the banking details.
A business account helps you have your books in order. It will, in turn, help you apply for a business loan at a later period. Not only that, but you will also get a reasonable price if you plan to sell it in the future.
Opening a business bank account in Australia requires several steps to complete.
Before opening your business account, it is important to register your business. The Australian Government recognises four business structures, as follows.
You can choose from the following three bank account options:
There are four central banks in Australia, including:
Once you decide on your business structure, bank account type, and bank, you can open the bank account using relevant information.
You can contact any professional accounting firm for valuable advice on financial management, tax planning, investment management, wealth management Perth etc. Palladium has been providing top-rated financial services for many years to the
Copyrights © Palladium Financial Group 2024
