Business Banking Basics: What You Need To Know
When starting a business one of the first, and most important, things you need to do is to set up a business bank account. It’s generally ill advised to run your business through a personal bank account as accounting can get very messy and having a dedicated business account allows you to separate out personal expenses from business expenses.
The Australia Tax Office (ATO) uses many different tools to identify income earned and see if it matches your income reported. Having a dedicated business account is the easiest way to keep everything in order so you can spend less time on accounting and more time running your business.
What Type Of Business Bank Account Do You Need?
There are a variety of different accounts available to you as a business owner and you need to make sure you get the right account for your business needs.
A Business Transaction Account
To start with most businesses will need a business transaction account – an account that allows them to spend and receive money.
These are easy to set up and most businesses will be able to get an account set up online in just minutes. You can click here to create a business account with Westpac, which is one of the big 4 banks in Australia.
If you have a more complex business structure then head into your local branch and one of the staff members will help you set up an account and let you know of any extra documentation they may need.
My first business account was run as a sole trader and setting up an account was simple. But when I established a trust the process was a little more complicated and I needed the help of the staff at the bank to get my account setup and running. It was still a very seamless process.
You’ll generally need some form of ID to set up your business account as well as any business documents the bank may request.
A Business Savings Account
You might also want to set up a business savings account with your bank so you can earn money from any excess funds you have in your account. This can make saving fun as the more money you save the more your business can earn in interest from those savings.
Most banks offer online savings accounts that are linked directly to your business transaction account.
You can move money between these accounts through your online banking portal but often cannot spend money directly from your savings account. You’ll need to move the money back into your transaction account before spending it.
For new business owners it’s a good idea to set up online savings accounts for things like GST and tax and add to these as your revenue comes in.
Many new business owners (myself included) can get caught out at the end of the year or quarter if they haven’t put aside money for their tax bill.
NOTE: Unlike personal savings accounts many business savings accounts have a minimum dollar requirement before you start earning any interest. I know of one bank where you earn 0% interest if you have less than $10,000 in the savings account. Being aware of this can help you to maximise your savings income.
Business Credit Cards
Not all businesses need a credit card to begin with and a business transaction account will usually come with a visa or mastercard debit card which will allow you to make online payments.
But once you’re established a business credit card can be a great way to manage your business purchases, get interest free periods on purchases as well as the extra perks that come with credit cards – such as points and extra warranties.
Points can then be spent on things like travel, gift vouchers as well as other items.
Interest rates apply to credit cards and you want to make sure you manage your credit card correctly so you don’t pay more interest and fees than you need to.