Good business practice requires separate bank accounts for personal and business purposes. Use your registered business name or trading name for your bank account to give a clear indication that it is a business account.
All business transactions should go through the business bank account. It is preferable to pay for all purchases relating to the business by cheque so that a permanent record of each payment will appear in your bank statement.
You should also bank all business income you receive into your business bank account.
Keep the number of private transactions you make through your business bank account to an absolute minimum. That way you will reduce possible confusion for you and your accountant.
If you take money out of the business for personal use as a separate cheque, clearly identify it as “personal drawings”. If you need to put money back into the business, it should be done as a separate deposit from other business sales, and be clearly identified as “personal funds introduced”. If your personal deposits are not identified as such they could be counted as sales by your accountant and you will have to pay more tax.
Make sure that you keep all your business bank statements. File them in order of their dates. You will not be able to complete your end of year accounts until you have them all. Most banks will charge you for replacement statements.
Most businesses pay expenses by cheque. It is important that you keep the stubs from the cheque you used, for your business records.
If you write a lot of cheques it is a good idea to record on the front of each completed cheque book, the cheque number of the cheque book and the dates the cheques were written. File old cheque books in order of their dates.
Make sure that you fill in these details on each cheque stub:
- The date of payment
- Name of payee (person or organization you are paying)
- The amount of the cheque
- Type of goods or services purchased.
Most businesses use deposit books to record their sales into their bank account. Banks can provide large deposit books with carbonized copies of each page so that you get a copy of the items you are depositing.
In your deposit book write down:
- The date of the deposit
- Name of each payer
- Amount of each deposit.
The deposit book will usually have columns for recording information about whether the deposit is from a cheque, credit card docket or cash.
CREDIT CARD PURCHASES
For purchases you make using credit cards, make sure you keep:
- Your credit card dockets
- Payment receipts
- Monthly statements.
It might be helpful to attach your credit card dockets and receipts to the monthly statement, so that they are all in one place. When you get your credit card statement from the bank listing your credit card expenses, go through it and write down what each expense was for.