Last week we talked about claiming expenses for home, vehicles and office. This week, we will look at bank accounts, handling cash payments and cash shortfall for expenses
Do I need a business bank account or should I put my income and pay my expenses out of my personal account?
You should set up a separate bank account that is purely for business. Deposit all your business income into that account and if possible, pay all of your business expenses out of that account. If you have a Limited Company or Trust, you must have a bank account in that name.
What if I have expenses to pay and don’t have enough money in my business bank account?
You will need to keep a record of all costs that you have incurred and make a note of transactions that you have had to pay for out of your personal funds.
What if my customers pay me cash? Can I pocket it and not declare it?
We recommend that you deposit all cash payments that you have received from your customers. IRD have parameters that they run your tax returns through and if your sales versus expenses do not match the criteria that they have for your type of business, you could end up being audited by IRD which is a situation that nobody wants to be in.
How do I pay people who work for me?
If they are operating as their own business, you can claim their costs based on their invoices. If they are not registered as a business and are not able to provide you with an invoice for their services, you will need to register with IRD as an employer and pay them wages with PAYE deducted.
What does registering as an employer mean?
It means that you will need to organise employee agreements for your staff and pay them the minimum wage and be liable for ACC levies on wages you pay them.
What do I put in an employee agreement?
If you go to http://www.dol.govt.nz/er/starting/relationships,agreements/builder.asp it will take you through the process of helping you fill out an employment agreement covering all of the legal aspects of an employment agreement.
Keep checking out our blog where we will be keeping you informed of changes to the accounting world and how they affect you and your business.
Once again, keep in mind that we are only a quick email or phone call away so you can book your FREE consultation with us – 07 308 5576
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