When filing your first tax return, it becomes clear that those who clearly separate business and personal income can save themselves a lot of work. (Photo: © stylephotographs /123RF.com)
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June 18, 2021
Business account, private account, savings account: founders who keep their business and personal finances clearly separate from the start always keep track of things, even in the hectic daily routine.
Separate your professional and private life: What applies to your daily work life should also apply to your finances . Because it becomes clear at the latest when filing your first tax return: Those who have multiple accounts and clearly separate their business and personal income and expenses save themselves a lot of work – and have better control over their accounting.
But which accounts are needed , and what should founders pay particular attention to? In practice, splitting the funds across three accounts has proven effective:
What about capital companies required by law due to the capital contribution to be paid is voluntary for freelancers, sole proprietors and partnerships: the business account. But This also makes sense for freelancers and sole proprietors, to ensure from the beginning to keep private and professional finances clearly separateAll income and business expenses, which can later be claimed for tax purposes, are then paid into the business account. Private living expenses, i.e., the self-employed person's salary, should be transferred monthly to a separate personal account with the heading "Private Withdrawal."
When searching for the right business account, founders should consider not only account fees but also service and features. How many transactions are included free of charge? Where and how often are cash deposits and withdrawals possible? Is a personal contact person available for questions? Also important: online security for mobile banking . "With free notifications via push notification or SMS, you can receive information about your account activity anytime, anywhere," says Dr. Andreas Houben, Head of Products and Marketing, TARGOBANK Business Customers.
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All personal expenses , such as rent, groceries, leisure activities, and vacations , should be paid into your private checking account . Depending on your circumstances, a joint account with your partner may also be a good idea. The most important thing is to keep your personal and business expenses clearly separate.
For startups in particular, the range of additional services is also attractive, as it provides support in the stressful daily routine and is now offered by many banks along with their accounts. These can include discounted rates for invoicing or accounting software , or integrated cash flow planning.
“When searching for the right business account, founders should consider not only the terms and conditions but also the services and benefits offered – and compare them to their individual needs. The overall package has to be right.” Dr. Andreas Houben , Head of Products and Marketing at TARGOBANK AG.
A third account for reserves and cash flow is essential for freelancers . This is where, for example, the reserve for tax payments should be kept. This means that the collected VAT and a certain percentage of the fee from each invoice should be transferred directly to a separate sub-account as a reserve for income tax . This ensures that the necessary liquidity is readily available when the tax payment is due. This account can also be used to accumulate cash surpluses or funds for larger purchases.
Especially in the early stages of self-employment, it's a challenge: You should always have an emergency fund in your account for difficult times such as illness or a lack of work. A rule of thumb is to set aside enough money to cover all your expenses for three months.
These questions can help founders find the right business account for their needs.
✓ How much are the monthly account management fees and what services are included?
✓ Which services incur additional charges, and how much are they? Will I need these services frequently?
✓ How many free transactions (transfers, etc.) are possible?
✓ To what amount and under what conditions is a current account overdraft, i.e. a time-limited overdraft facility, possible?
✓ Is the provision free of charge, or is interest only charged if I actually use the loan?
✓ Is it a branch bank or a purely online bank?
✓ Is there a branch near me where I can get advice and process my payment transactions (e.g., cash deposits and withdrawals)?
✓ What other services does the bank offer (dedicated contact person, convenient mobile banking, free notifications of account transactions)?
✓ Does the bank offer services beyond its core business (accounting and invoicing software, automated liquidity planner, multi-banking functionality)?
✓ Is a credit card included, or are credit cards also available for my employees?
✓ What payment options can I offer my customers?
✓ Can I purchase payment terminals through the bank?
CONCLUSIONTip: If you clearly separate your business and personal income and expenses, you will have better control over your accounting.
Three tried-and-tested accounts: Business account, personal account, tax, savings and reserve account.
Pay attention to the conditions: In addition to account fees, founders should also keep an eye on service and benefits.
Discounted conditions for additional services can be interesting for founders when choosing an account.
Create reserves: Parking a certain percentage of each invoice directly for the tax office ensures the necessary liquidity.
Prepared for revenue losses: A third account should always contain an emergency fund for difficult times.
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