Separating business and personal finances with a separate business bank account


Separating business and personal finances with a separate business bank account

Separate your business finances from your personal finances, always!

One of the very first questions we always ask a new client is whether they have a separate bank account for their business. This is such a crucial step to take when you start a business, whether that business is a side hustle supplementing your current income or a fully functioning business which is your sole income.

A separate bank account is the very first step to separate your personal and business funds and really goes a long way in your mindset shift of business vs personal finances too.

If your business is a registered company or CC (CIPC registered entity), you will need to have opened a bank account in the separate entity’s name. Remember, as a registered company your business is a separate legal entity and will need to be completely separated from anything in your personal finance space.

We so often come across new clients who have operated their business finances through their personal bank accounts and the complications that follow make it a far lengthier process when completing the bookkeeping capture and preparing for tax season.

  1. Separating the two allows you to better analyse and monitor both areas of your finance space. This is vital in both the financial health of your business as well as for your own personal finance planning.
  2. A separate business bank account means a far easier reconciliation process for your business accounting records. Whether you are maintaining these yourself or whether you have a bookkeeper / accountant assisting you, the time saved will be significant.
  3. You can better monitor business cash flow and plan for any future projects / larger expenditure.
  4. Everything is just so much simpler!

If you don’t already have a separate business bank account, head along to your bank of choice today and open one!

  1. Notify all customers / clients of the new banking details and update your invoice and statement templates to reflect the new details.
  2. Move any business-related debit orders to be processed off the business account.

We often get questions from new clients starting new businesses as to how they can go about opening a sole proprietor business bank account and what they will need to take along to the bank.

Generally, most South African banks require the following in order to open a bank account for a sole proprietor:

  1. Your original SA ID document
  2. Your business name (the bank account will be opened as “Your Name T/A Your Business Name”)
  3. Proof of address not older than 3 months

PS: Once your new business bank account is opened, be sure to change all business-related expenses to be debited off or paid for from this new bank account. The business bank account should be used for all business-related income and expenses only and anything of a personal nature should be done from your personal bank account.

To better understand what qualifies as a business expense, you will need to chat with your bookkeeper / accountant about those expenses specific to your business.

Yours in simplifying finance,