How do I minimise my work and cost, and get the best outcome?

Advice for Sole Traders and Contractors

Use a business bank account

One of the most helpful things you can do is to keep your business and personal banking separate by having a business bank account. Use the right card when paying for business and personal items. Bank all cheques and cash takings promptly.

At the end of the year, your business and personal expenses will need to be separated so your correct deductions can be calculated. Keep your claimable receipts and invoices in a file with your monthly statements. You probably won’t remember if that newsagent charge was for birthday cards or office supplies, and your bookkeeper and accountant aren’t going to know either.

If you can reconcile your bank account balances to your recorded business income and expenses each month, quarter or year, then you can more easily prove that your records are complete and accurate.

By law you must keep good business records. Correcting mistakes can cost you significantly more in time, accounting fees, and Tax Office penalties. One way to test the integrity of your record keeping system is regular bank reconciliation:

Basic examples:

  • Opening balance on 1/07/11 plus total business income deposits minus total business purchases, plus/minus other described transactions, equals closing balance on 30/06/12.
  • Record the balance on the bank statement, list outstanding deposits, list outstanding cheques, calculate closing cash book balance. If you keep a running cash book balance, these figures will agree.

It’ll take you a great deal more time to record and reconcile all the personal transactions. That extra time may cost you more in the long run than the extra monthly bank fees you pay for having a second bank account. Time is money…so make less bookwork for yourself!

More information:

ATO Publication – Record Keeping for Small Business – Bank Reconciliation Statement