Managing a Business Bank Account as a Contractor
A business bank account serves as a hub of information for legislative purposes when filling providing and submitting Contractor Limited Company Accounts
, corporate tax returns and Personal Tax Returns
. All the funds and money that move in and out of your company account that make up your monthly statements are used in compiling all these accounts.
Funds in your business bank account are legally owned by the business and not by you the contractor as a company is a seen as a separate entity of its own with its own set of laws. This means that an efficient and accurate process which follows best practice must be put into place to manage all the money that goes in and out of the company bank account which adhere to company and tax laws. Ensuring that an accurate record keeping system is in place from day one will make compiling all company accounts and tax returns easy and stress-free.
Movement of money in and out of a company account
A company bank account must be run with efficiency and accurate record keeping in the form of cheque books and paying-in deposit books. All the money that goes out of the company bank account should be paid via company cheque only. This includes all bills paid on behalf of the company as well as expenses, salaries and dividends paid to the contractor. All money that goes into the company bank account should be deposited with a paying-in deposit slip. This includes all the money paid from invoices issued whether they took the form of cash or cheque and any money from a contractor’s personal bank account that acts as a start-up loan.
The rise of electronic banking means that contractors now have a more efficient route to control money moving in and out of a company bank account. By using their PC, smartphone or tablet, contractors can easily manage company funds securely. All money that moves in and out can be electronically tracked. This includes money paid for company bills, contractor salaries and expenses as well as money that has come in from clients for work done. Although a cheque book and paying-in book is still issued by banks today, most of the transactions are completed electronically via the bank’s secure online banking platform. A company debit and credit card are also widely used and can also be tracked electronically via the online bank account.
Keeping Electronic Records
Monthly company statements list all the transactions that occur detailing money that moves in and out of the company bank account and specifies the method used, for instance money was deposited by cheque, debit card or electronically or money was drawn via debit card or paid electronically into another account. However, a clear and concise ‘audit trail’ is recommended especially if an HMRC inspection takes place. This means that all online transfers should have accurate notes in the accounting records pertaining to each payment made online. For instance, if a company bill is paid electronically online then a note should be added to the accounting records of this payment and the date it was paid. This leads to an accurate and efficient system for maintaining record keeping for year-end accounts and tax inspections. All company accounts will be legally compliant this way making it an essential part of running your contactor business.