Besides love, why are we all in small business? For the love of owning something we’ve worked hard on and watching it thrive. Having said that, many small business owners tend to overlook the care that needs to be taken in managing money because errors can be costly. One important part of owning a small business is having a business bank account, separate to your personal account. Here we’ll address whether you need one and how to set one up if you do.
To begin, do you even need a business bank account? As a business owner with an ABN, you’ll be aware that there are four different types of ABN holders or business types. There’s sole trader, partnership, company and trust. Sole traders are the only business types that are under no legal requirement to have a business bank account as long as you’re fully aware of your revenue streams for tax time. If you can’t remember what kind of business you are, use the ABN lookup to search your name, ABN or business name.
Having said all the above, it can still be beneficial to consider a business bank account for a professional appearance in front of clients, the ability to track business expenses, and the ability to give more concise information to your accountant when it’s time to fill out a tax return.
Setting up an account is as simple as taking your business’s information (ABN, ACN, business/company name, etc.) to the bank of your choice and asking to open a business banking account. The difficulty is sometimes just in asking the right questions and deciding what works best for you as not all bank accounts at every bank are exactly the same and the configurations one can use in their business banking are virtually limitless when all options are considered.
The Australian Taxation Office (ATO) recommends considering six key criteria when looking to open a business account:
- The services you need based on the type of business you own
- Transaction and account service fees (which can add up)
- Whether you’re only dealing with transactions nationally or internationally as well
- Interest on deposits and on credit cards
- Fees on business cards
- Facilities like EFTPOS if they apply to you
- Online services if you do most of your banking online (that’s a bonus criterion we thought was very important)
A personal suggestion from us is opening more than one business account depending on how your business works. For starters, absolutely open a second account just to put aside the money you’ll have to eventually pay in tax at the end of financial year. This way you aren’t accidentally overspending and digging yourself into a rut when that time comes around. If you also have employees, we recommend yet another account where money goes towards paying them, ensuring they don’t revolt against you for coming up short on pay day. Lastly, we also recommend a separate account with money to pay your salary so that you don’t lose track of your own reward for running a successful business either!
With all these suggestions and necessities in mind, get yourself well informed about the nature of your business and clearly identify what you need before going to a bank. Walk in with a plan so that you walk out with what suits you best as banks can be known to bolt on extras you don’t require.
We hope this article has provoked thought about your business and what you need when handling its money. For more articles and blogs about all things small business related, check out our other material!
