When I first started working as a freelance I foolishly (and not Motley Fool’s way!) Carried out all of my business transactions through my personal chequing account. I naively thought that at tax time it would be easy to go back and detail which transactions were business income and expenses versus personal transactions.

This resulted in a nightmare for me and the poor accountant I hired to decode the mess I made.

Since then, I have gone to great lengths to maintain a separate bank account for all self-employment income and expenses. However, the process was not very intuitive, but after going through it I now have a pretty good idea of ​​what to do if I was a new entrepreneur starting my business today (as some of you reading this article).

Here are my top tips for making the process painless, seamless, and affordable. You will learn from my mistakes!

Put your documents in order

Banks love their due diligence. The last thing a branch manager wants is to open an account for a shady character without any paperwork validating their identity or ownership of their new business. As a new entrepreneur it is absolutely essential that you get your documents squared. This may include:

  1. Name, home address, phone, email, date of birth, government issued photo ID;
  2. Registration of legal company name, name of DBA (doing business as), if applicable, and registered office address;
  3. Articles of association and certificate of incorporation (if a public limited company) or registration / partnership agreement (if a partnership).
  4. List of directors and shareholders of the company.

There may be other items applicable to this list, so you will need to check with the particular bank you want to open an account with. However, these are essentials that almost any reputable branch will ask for.

Choose the best account to open, not the cheapest

I did not follow this tip. I opted for the account with the lowest monthly fee, not realizing that there was a cap on transactions before additional fees were applied. After a month of successful freelance work where I completed many concerts, I was shocked to find that additional fees had eaten away at my earnings. If I had chosen an account with higher monthly fees, but more transactions included, I would have actually saved money.

Therefore, it is important to carefully plan the usage of your transactions. Think carefully about how many deposits, withdrawals, and transfers you are likely to make in your first year of business. Use caution and give yourself some space to work. It’s better to pay a little more for more than you can always use when business picks up, rather than getting stuck with extra charges because you’ve gone over your activity limit.

Get good accounting software

Initially, I tried to save money by doing my bookkeeping by keeping an Excel sheet of all the transactions. I didn’t adhere to double-entry accounting standards and it quickly turned into an unrecognizable monstrosity of broken references, poorly formatted cells, and errors. Took twice as long to clean as it would if I was just shelling out the money for good accounting software.

Nowadays, software like QuickBooks is readily available online for entrepreneurs in various packages, with different prices and features that you can choose from to suit your needs. They offer easy integration with most online banking services, allowing you to track transactions more or less automatically. Spending the necessary money on this essential software will save you a lot of time, worrying less about finances and focusing more on growing your business. As an entrepreneur, time is money!

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