Home Forums Money matters Separate business bank account for small (tiny!) micro business?

  • This topic is empty.
Viewing 14 posts - 1 through 14 (of 14 total)
  • Author
    Posts
  • #993035
    Stitches
    Member
    • Total posts: 13

    Hi all
    Selling through ebay at the moment, very small micro-business. Currently just using my personal credit card for purchases from wholesalers etc, money coming in from sales is mainly via Paypal, with an occasional,deposit to my personal bank account.
    If I open a “business” bank ac it’s going to cost me, say $10 pm, yes I am a micro business.
    Just wondering what others do….
    At the moment am keeping records manually in a spreadsheet, easy for me to differentiate between personal and “business”.
    I am a sole trader with a registered business name……this is my only income so at this stage will not be paying tax.
    Thanks all!

    #1189463
    Dave Gillen – FS Concierge
    Keymaster
    • Total posts: 2,543

    Hi [USER=70013]@Stitches[/USER],

    If you’re having no problem keeping records, then there may not be a strong reason to change. Considering you’re a micro business, one problem that can pop up with a business account is having to make sure there’s always enough money in there to cover outgoing expenses.

    That could be a good thing if you’re looking for more discipline and clarity around your numbers, but it may be less convenient if your biz has low or irregular cash-flow. Example – if you make $500 in month 1, and then your biggest annual bill comes in ($600), you might need $100 from your personal account, so in this case the desired simplicity of a business account could elude you.

    Dave

    Dave Gillen - Client Acquisition | Brisbane | (07) 3180 0288
    #1189464
    Jason Ramage
    Participant
    • Total posts: 3,161

    Hi Stitches,

    please note i am not an accountant and my advice is not based on tax implications/avoidance/payments although may i ask why are you considering a bank account in the business name?

    Generally speaking, i advise people should always have a separate bank account just for professional imagery etc although there are some cases where this has no real bearing and the electronic world can be this way – especially ebay etc for ‘smaller fry’..

    One thing i would suggest though is to keep a completely separate account, do not muddy the scenario with using your personal daily bank account with business funds.. it will get messy no matter how good you are with record keeping… honestly..

    Cant really say more as the post eludes to not paying tax, does this mean you will be hiding your sales or not selling enough to warrant tax? your answer will also have meaning to a ‘business bank account’ needed or not.

    Overall, if you are wanting to grow your business or have largish sales it can be advantageous to run a business account even at $10 a month as you can look at merchant accounts and an array of other ‘business’ related services on offer that isnt via running a personal account.

    You may want to chat to an accountant about your projected sales and your personal situation, which are not privy to, to discuss this in more detail to ensure you are on the right path.. Most people will not, should not, tell an open forum the nitty gritty of all ins and outs so financial guidance can be the best option.

    Cheers

    Jason Ramage | Lucas Arthur Pty Ltd | E: hello@lucasarthur.net.au   P: 61 3 8324 0344    M: 61 412 244 888
    #1189465
    arrowwise
    Member
    • Total posts: 641

    As you grow a separate back account for your business is essential. It will allow you to neatly associate 100% of such transactions on your account against your business, not to mention making your book keeping process a lot more efficient.

    #1189466
    bb1
    Participant
    • Total posts: 4,485

    I have being using the same bank account for business and personal use for the past 8 years with no problems, You just code any personal items to Owners drawings or whatever fancy code you want to use. Makes absolutely no difference to book keeping requirements.

    #1189467
    Jason Ramage
    Participant
    • Total posts: 3,161
    bb1, post: 222333, member: 53375 wrote:
    I have being using the same bank account for business and personal use for the past 8 years with no problems, You just code any personal items to Owners drawings or whatever fancy code you want to use. Makes absolutely no difference to book keeping requirements.

    Young Man,

    This is good for those ‘good’ with money, although in my previous life i had seen many small business owners (t/as sole operators) use personal and business out of same account and the common issue was SAVINGS! Allocating funds to GST, or to TAX, or to whatever and then going to the pub and entering keycard – oh man, awesome i have $2k (forget it was from the job that materials also need to be paid for) and come monday with a headache in tow there is no money for the person nor the business to operate that week.

    Again, works well for a few although can be quite dangerous if you are not able to manage joint finances.

    Jason Ramage | Lucas Arthur Pty Ltd | E: hello@lucasarthur.net.au   P: 61 3 8324 0344    M: 61 412 244 888
    #1189468
    Stitches
    Member
    • Total posts: 13

    Thanks everybody for your input. Much appreciated, am managing ok but just wondered what others did.
    Dave, great advice , thanks, that helps!
    Steve, yes, you are right…. Great advice for “when” my business grows.
    Bert M, Thankyou too. You have responded to several of my questions, I find your input really helpful. Much appreciated. I really love your posts! Please keep it up.
    Harryluke logistics, thanks for your reply. I am not trying to dodge tax, am doing this all legit! As I said, this is my only income….if I make enough to pay tax as a sole trader that’s fantastic! So I think you are saying keep a separate personal account. Thanks, yes maybe that’s an option.

    #1189469
    bb1
    Participant
    • Total posts: 4,485
    HarryLuke Logistics, post: 222340, member: 34537 wrote:
    Young Man,

    This is good for those ‘good’ with money, although in my previous life i had seen many small business owners (t/as sole operators) use personal and business out of same account and the common issue was SAVINGS! Allocating funds to GST, or to TAX, or to whatever and then going to the pub and entering keycard – oh man, awesome i have $2k (forget it was from the job that materials also need to be paid for) and come monday with a headache in tow there is no money for the person nor the business to operate that week.

    Again, works well for a few although can be quite dangerous if you are not able to manage joint finances.

    By choice,
    Sadly I must agree with you (LOL), and yes it does all come down to discipline and knowing where your business stands. I guess, I have it worked out that I am one of those weird people (I said that), who pay GST progressively so there is no shock or shortfall of funds at the end of the quarter, when people complain that they have to pay GST, the GST never belonged to them. And similar with other costs.

    But that is a position all small business’s should get them selves to, and if they cant, than they need to question is the business viable anyhow.

    #1189470
    geegee
    Member
    • Total posts: 89

    I’m am a “tiny” sole trader too and I had to have a business account for my EFTPOS terminal. However it pays no interest. So I also have a personal savings account that I keep for the business only.

    #1189471
    Stitches
    Member
    • Total posts: 13

    Hi Robyn
    Thanks for that…..much appreciated!

    #1189472
    Markbas
    Member
    • Total posts: 4

    Hey guys, have a similar question like Stitches. Reading the comments here I think for me it would be best to have a seperate accounts, but my question is, should I open a business account or a normal saving account? Im a graphic designer and also have a small t-shirt business. Beside the $10/monthly fee I kinda feel that business account isn’t as flixible as normal savings account, even thought nothing really stand out from the terms & condition.

    #1189473
    GuestMember
    Member
    • Total posts: 318

    Banks often state that personal accounts must not be used for business. Check the Terms and Conditions. A business account in a company name can look a bit more professional if direct bank transfers are used. Less so if PayPal or other system sits between you and the customer. PayPal and other APIs, however, sometimes demand a business account. We had to prove it.

    Limited Companies must have a separate account. Money entering a limited company does not belong to an employee or director. It belongs to the company until paid out officially on payroll, bonus, etc.

    Charges can seem unfair in the early days and people have been known (ahem) to use a personal account for sole trader and partnerships, micro businesses, or until proof of concept has been established.

    Some have even commented that if legal action cannot be taken, a conservative position is to risk the ticking off and being asked to either migrate to a business account with them or another bank and know that they’ll want your custom. Obviously, I couldn’t possibly condone such naughty behaviour but I have a sense of fair play.

    #1189474
    Hatching_It
    Member
    • Total posts: 414

    Thinking outside the box here, why does it need to be a business bank account? You really only need those if you need chequeing or merchant account settlements going in to them.

    If you need to keep cash separate because you’re as bad at separating money as I am just set up a separate free personal bank account with your bank and use that as your “business” funds account.

    At the size you are, you’re really only carrying out a hobby anyway.. When you’re ready to get a website built and be “more professional” then you’ll need a business bank account to have card payments settle.

    Solved :)

    Maclean

    #1189475
    Jason Ramage
    Participant
    • Total posts: 3,161
    Hatching_It, post: 224129, member: 53049 wrote:
    Thinking outside the box here, why does it need to be a business bank account? You really only need those if you need chequeing or merchant account settlements going in to them.

    If you need to keep cash separate because you’re as bad at separating money as I am just set up a separate free personal bank account with your bank and use that as your “business” funds account.

    At the size you are, you’re really only carrying out a hobby anyway.. When you’re ready to get a website built and be “more professional” then you’ll need a business bank account to have card payments settle.

    Solved :)

    Maclean

    Howdy Maccas

    Always love your direct approach (with insight business insight – merchant) to these sorts of matters.. What i would add is that it is imperative that one considers how a bank looks at you to consider a long term relationship.

    Yes, we all tend to say that you need a business account if you want merchant or this or that although what is overlooked is the reasoning behind it. Banks separate their operations into retail, business, commercial (and then private banking and a few other odd ones that are irrelevant here) and if you want to commence a long term business relationship you must set up your accounts correctly in the eyes of the banks. Meaning if you are sole trader, have personal name t/as etc, or a company have it registered as a company and so forth.

    As Paul mentioned, the legal entities of the accounts are also a huge consideration (albeit not mentioned in that way by Paul) such as a company being its own legal entity MUST have its own accounts… A sole trader is legally responsible for his trading be it under his/her own name or a t/as and thus easier to conduct under your personal accounts… and a trust doesnt technically hold anything, its registered under its trustee which is normally a company being the legal entity able to conduct business and as such requires its own accounts in trust for the trust… Hope that makes sense?

    As Maclean raises, if you are not chasing the ongoing benefits of being seen as a business and do not need additional services now or in the near future you can hold personal accounts (not that you are meant to) but if you require merchant, company accounts, insurances, overdrafts, etc etc you MUST begin the relationship with the bank from the outset under the correct entities and accounts.

    A little tip… If you are worried about fees whilst getting your enterprise up and running, there is one of the major 4 pillars (banks) that will offer you 12 months free service fees to get you on board *saving $120 p/a first year. Another HUGE point to note, is banks take your history into consideration.. Let me give an example..

    example a: You are a company running a personal account as do not see the reason to operate a business account (no judgement here) and you want to get an overdraft, you run the personal account for 12 months and build a history in this account.. You apply for an overdraft with said bank, they ask for trading history and do not accept the personal account as it was structured incorrectly from the outset and want you to now provide xyz to prove things.. bit more difficult..

    example b. You run a business account showing ins and outs of your business account and need an OD. The bank will review your history in that entities name and see the ins and outs and your considerable expertise in managing funds and will go down a different (dare i say, simpler) processing path than example a! Furthermore, and this is irrefutable, i also know that this history bundled with a few other ticks and flicks can also expose you to a ‘pre-approval’ process for some banks for an OD based on the ins and outs of the account you are holding in the business name.. Good to know for future relationships.

    If you are a hobby, no company you can run personal.. Although if you are a seeking to be acknowledged as a business client in the eyes of the bank and want access to business services you need to be conducting as a business.

    Hope this helps in some way?
    Cheers

    Jason Ramage | Lucas Arthur Pty Ltd | E: hello@lucasarthur.net.au   P: 61 3 8324 0344    M: 61 412 244 888
Viewing 14 posts - 1 through 14 (of 14 total)
  • You must be logged in to reply to this topic.