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Is all that money in the bank mine?

Posted 16 Oct '19

Is all that money in the bank mine?

As a bookkeeper we work with a lot of new businesses, both sole traders and companies and who do not understand cash flow. They see money in the bank account and want to take it out so fast that it makes turnstiles spin!

As a business owner it is important to understand the money that goes into the bank account must be
used for specific things.

1.       Are you registered for GST?

If yes, then 10% of every dollar that gets deposited into your account is due to the ATO. Your business is acting as an agent and collecting GST and you need to pay this to the ATO when your BAS is submitted. There is an offset for GST paid, but if you are running a successful business this amount should always be less than the amount due to be paid. I always recommend to my start up clients that they should put aside the 10% of each invoice paid by a customer, or 10% of the income at the end of the week to save to pay the GST when it is due.

2.      Do you have staff?

When you pay staff there is an amount of PAYG withheld from the staff’s pay. This must be paid to the ATO when the BAS is submitted. This could be monthly or quarterly depending on the amount withheld over the year. This is not the business’s money and should be put aside in a separate account so that you can pay it to the ATO when it is due.

The staff are paid super. This amount is payable 28 days from the end of quarter. Sound complicated? Not at all. Set up a separate bank account – preferrably one with no fees and transfer the amount of super at the end of each pay period. At the end of each quarter, that is in the first week of January, April and October pay super. Missing a month? Yes. The payment for the June quarter super must be paid before the 30th June. 

3.      Tax

If you have made a profit during the year, there will be tax to be paid. This is where most small businesses don’t plan for this. In the first year of running a business you need to put aside a portion of the money (the rate is based on whether you are a sole trader or company). After your first tax return is lodged, the ATO will set an amount of tax that will be paid when you lodge BAS. If you don’t lodge a BAS, you will be sent an IAS form to allow you to pay money towards your tax. At the end of the year, your Accountant will then be able to work out if you have paid enough tax or if you need to pay more.

4.      Growing the business

To be able to grow a business you must invest back into a business whether it is in marketing, research and development or hiring staff. This is what is going to grow your business.

If you are a sole trader set up a separate bank account for the business. This account is not to be used as your personal ATM. Work out what the business can afford to “pay” you each week and limit yourself to that amount. The reality of going from being a wage earner to having a business where cashflow is not consistent is hard. The bubble of owning business can burst quickly. The reality is, if we manage our money and work hard the businesses can grow.

We don’t need to buy the new Mercedes with the first cheque that comes from a client, or in this day, first EFT…we need to ensure that the money is used wisely.

If you set yourself for the future when you start your dream business, your dreams will flourish.


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