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  • #986975
    BiggieUp
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    Hi All,

    I have started a small business (very small at this stage) as a sole trader.

    I have one personal bank account, which is a mortgage offset account so I put every $ I own in there to minimise home loan repayments. I also have one personal credit card.

    I want to conduct myself as a sole trader using the cash from my personal bank account and credit (for convenience) of my personal credit card. All sales will go into the personal account and expenses paid with the credit card.

    At the same time, all my personal income and expenses go through the personal bank account and personal credit card.

    I have signed up with Saasu online accounting software and have no idea how to account for all of this.

    I understand how to add line items for sales revenue and expenses, but the business is me and I am paying for it. All the money is the same. This is what does my head in.

    I would never really consider the business to have a balance of its own (although this is probably foolish) as it is all just my money at the end of the day anyways.

    Can someone please provide some advice for how to account for this situation in the bookkeeping world?

    Thanks so much.

    #1160442
    Lucinda Lions
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    Hi BiggieUp

    Welcome to Flying Solo!

    If you’re interested, we have some informative articles in the Financial Management section of our website.

    You may find this thread beneficial too: Starting a business.

    It would be great to find out more about you! Can I suggest that you share a bit more information about yourself? A good first step is to set up a signature and to personalise your forum profile.

    Wishing you every success with your business journey. Have fun!
    Lucinda :)

    #1160443
    Past-Member
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    Hi there – you need to separate business and personal technically, although all income is just to you.

    Disclaimer: I am not an accountant or adviser – this is just a suggestion through experience.

    Although you can use your personal credit card you should have a business account that has your ABN connected to it for legal reasons. You can still pay your bills with your credit card, but transactions will be easier to define.

    Eg
    Business a/c Balance $1000 (have enough to cover total business expenses)
    Spend $100, $50, $150 on credit card on business expenses and itemise them in Sassu or whatever you are using.
    Spend $100 on personal expenses from credit card. In Sassu label them as personal drawings.

    At the end of the month/statement, make one transfer from the cheque account to the credit card account for the total and any interest.

    This is just one way for what you are suggesting. I am not an accountant – so please check with yours. It’s only a suggestion. At the end of the financial year Sassu (or whatever you are using) will compile reports for taxation which will include income, expenses and drawings (but not label those personal items which is better for you).

    I do believe you should have at least one business account because you need to know what is going in and out of your business monies.

    It is also generally suggested that you have a high interest savings account in which to transfer funds for tax, payg. A suggested amount is 20% of business earnings. Any savings left after tax time are then a bonus for you.

    Cheers.

    #1160444
    bjmyers
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    KarenC, you might not be an accountant, but you’ve got the right idea. It makes things a lot easier when you separate your business dealings from your personal finances. Having a separate business bank account helps isolate the income and expenses for preparing BAS and income tax returns and knowing how the business is travelling.

    BiggieUp, instead of connecting your personal credit card to Sassu and reconciling it each month, consider using expense reimbursements for business transactions on your personal credit card. I do this myself in my business (I use Xero for my accounting) and it means I don’t have to capture all of the personal spending just to get the few business related transactions. It is all relative to the number of business transactions though.

    You’re also right, that as a sole trader, the money in the business is yours and there are no further hoops to jump through from a tax perspective to take funds out of the business. If you have somewhere better to park money instead of a low (or nil) interest transaction account, it should be explored. Just remember to classify money taken out of the business for personal use as ‘Drawings’ to avoid claiming expenses you shouldn’t.

    Good luck with your venture.

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