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Business Bank Account

by Tash Hughes of Word Constructions

Most new businesses are run on a tight budget, and everyone knows that having an extra bank account will cost more in fees. So how should a new business deal with its money?

 Why Have a Business Account?

 Having a separate account for your business and personal finances makes accounting much simpler. Your business records will (hopefully!) tally exactly with the bank records if the account is solely for business use. This helps you keep track of where your business is, financially, and be easier to prepare reports, tax returns and BAS statements.

 Assuming that at least some of your income will be gathered in the form of cheques, a business account also simplifies deposits. A cheque made out to Business DEF canít be accepted into your personal account; your invoices must clearly state ďplease make all cheques out to R SmithĒ and even then you may get DEF cheques that you canít easily deposit.

 As a sole trader, cheques made out to the business name and your personal name can be accepted into your business account.

 Donít forget that all bank fees in your business account can be claimed as expenses in your tax returns, too.

Which Business Account do I need?

 Each bank and credit union will have its own business account, or accounts, for you to look at. All have a different fee structure to those in personal accounts; you are likely to have to pay a fee for each deposit, withdrawal and cheque.

 It is best to look at a number of accounts and compare them in terms of your own business. For instance, if your business will receive many cheques and pay out money infrequently, an account with low deposit fees will suit you better; a business receiving direct deposits or few and large payments may not worry about low deposit fees if the monthly fee is low.

 Before looking at potential accounts too closely, plan out the types of transactions you anticipate in each month. Having this guide will allow you to make realistic comparisons between accounts.

 Some factors to consider in choosing your business account are:

 v     Monthly fees

v     Deposit fees, including additional charges for depositing cheques

v     Access modes (eg will you get an ATM card?)

v     Is there a credit option? Either credit card or overdraft facility

v     Withdrawal fees Ė including for bpay, direct debits, over counter and cheques

v     Convenience Ė where is the nearest branch? Nearest ATM? Is it easy to transfer to/from your personal account?

v     Can you access net banking? Phone banking?

v     Costs for money conversions if you have/expect many overseas transactions

v     Does it pay interest? Note many business accounts donít pay interest, or at least not on small balances

  Note ALL cheque accounts incur a tax on every withdrawal. This is a government tax and will be the same for all financial institutions.

  How do I get a Business Account?

 Once you have selected your account, you will need to visit the bank and set it up. Some of the set up may be possible online, depending on the bank, but there is paper work to be handled that must be done in a branch.

 All business accounts require a Business Name Search before it can be fully operational. This is to check that it is a legitimate business and that you have the right to set up the account. Most places charge you $40 to $50 for this, which is mostly a statutory charge for the actual search.

 To open an account you will need:

 v     Copy of Business Name Certificate (some places want this, others donít)

v     Copy of ABN confirmation

v     Personal identification (100 points worth as per opening any account. Some examples for this are your licence, passport, existing bank account details, Medicare card, utility bill and a birth certificate.)

v     Money for an initial deposit. The money required will be at least $50 to cover the name search; each bank will have a different minimum amount depending on the account features.

v     A completed application form with the name, address, contact details and birth date of each account holder included.

 

Tash Hughes is the owner of Word Constructions and assists businesses in preparing all written documentation and web site content. Tash also writes parenting and business articles for inclusion in newsletter and web sites.

This article is available for free use on your web site or in your newsletter.

It must be acknowledged as written by Tash Hughes of www.wordconstructions.com.au and copyright remains the property of Tash Hughes.

Please notify us of your use of this article or to request information on commissioned articles.

 

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