Do You Need a Separate Checking Account for Your Business?
A question that I often receive is, “Do I need a separate checking account for my business?”
It is highly recommended to have your business money in a separate account. By setting up a separate bank account, you have established a record of business income and expense that will help at month end with your bookkeeping.
Your bank statement at month end gives a record of income and expenses directly related to your business.
All monies, including cash, received by your business should be deposited into a separate bank account. A detailed deposit slip will give you a record of who paid you for your services. Total your business income deposits on your bank statement. This will give you the total sales for the month.
If money deposited is from other than a sale, make sure to make the proper notations and keep backup paperwork that proves the deposit was from non-income accounts. Some examples would be:
- Transfers of funds from personal bank account or line of credit
- Refund from returns, refunds or rebates – keep copy of receipt or check
Checks and debit card purchases give you a record of your expenses. Using duplicate checks or keeping check stubs from computer generated checks are a secondary proof of payment for receipts and bills.
If your main source of money is being deposited into this business account, avoid the temptation of paying personal bills with this account. Instead, transfer funds from your business account for personal expenses to keep your records clean. Using transfers will also prove where the money in your personal account came from. Make sure to keep deposits that aren’t transfers as proof of non-income deposits or a record of other income outside of your business.
Record business transactions as they happen in your bookkeeping system. At the end of the month, reconcile with your bank statement as a review and check that you have all business transactions recorded.
The same theory holds true for credit card purchases. Whenever possible set one card aside for business use only.
For more information about separate bank accounts, business transactions, or business income go to our Facebook page and message us, or send an email request to Evyln Carlile at Simple Office Solutions email@example.com.