Must Know Best Practice Bookkeeping - Tip #2

This one's pretty simple!

Set up 3 business bank accounts.

You may have read the book Profit First, Mike Michalowicz.

Whilst an informative read, I can say from a bookkeeping perspective having 5+ bank accounts is a logistical nightmare! From my point of view, I recommend 3 bank accounts.

1. Main business transaction account
2. Liability account (GST, PAYG, PAYGI, Income Tax)
3. Business Savings account

What are the benefits of setting up 3 bank accounts?

For me, it’s a mindset. I like to look at my bank accounts, knowing exactly where I stand and what is the business funds, the ATO funds, and my savings.

It helps establish goals.

It eliminates surprises - having multiple accounts allows you to meet payment deadlines on time.

You can avoid payment plans with the ATO

It helps with budgeting and cashflow.

It reduces overspending

What are the alternatives?

If you feel as though having 3 accounts is just too overwhelming, just stick with 2 accounts. I highly recommend you have an absolute minimum of two accounts. It’s a must when running a business!

Hot Tip

Process your superannuation liability each time you process payroll. Paying an additional 10.5% super on top of gross wages won’t hurt your bank account balance (as much)!

Need advice on setting up bank accounts and understanding how to prepare for upcoming liabilities?

Let’s chat!