Making Deposits

Accounting is the bane of many small businesses. With efforts spent on sales, marketing and customer service, keeping the books up to date often falls to the bottom of the priority list. That’s why it’s important that your accounting flow is as fast and efficient as possible.

One way to streamline your accounting is to make the transactions in your check register match the transactions at the bank. This is generally the case with expenses. You use your debit card or write a check, and these show up as a single transaction. Deposits, on the other hand, can be more complex. Lumping checks that you receive into one deposit can make it more difficult to determine match up money you’ve received with money you’re owed by your customers.

If you receive just a few checks per month from your clients, we recommend that you deposit each check separately. That way, when you scan your check register, you can quickly match up a deposit with an invoice to see if it’s been paid. 

We also recommend setting aside the money you may owe on taxes at the time you make your deposit. Depending on your tax bracket, this can be between 35-45%. This is important for two reasons. First, by setting aside money for taxes, you’ll have the cash you need when it’s time for quarterly estimates or filing your annual return. Second, by pulling out money for taxes, you’ll know that what’s left in your checking account is truly yours to spend or save. Leaving the full amount of each check in your checking account can be dangerous. It can trick you into thinking that you have more cash to spend than you actually do. That can lead to a nasty surprise when it's time to pay the tax bill and you find that you’re short on funds.

This brings us back to the “one check/one deposit” rule. After depositing the check, immediately transfer the tax set-aside. That way, the two transactions will be close to one another in your register. With one glance, you’ll be able to see how much you’ve been paid (allowing you to quickly match up to an invoice) and how much you set aside for taxes (if you don’t see this number, that’s a reminder to do it right away). If you use a banking app, making the deposit and the transfer between accounts is very fast.

There’s one small caveat. Generally, bank transfers happen instantaneously, while some banks won’t make deposited funds available to you for a few days until the check clears. Make sure you have enough money in your account to cover the tax transfer, especially if you’ve just deposited a big check.