Operating Your Ltd Company Bank Account

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Operating Your Ltd Company Bank Account

Or, How to Pay Your Accountant Less

After incorporating your company, the next step in the set up process is opening a bank account in the company name. A bit of care taken at this stage to adopt some simple good habits will save you time and accounting fees.

Let’s start with by far the most important:

1.  Sign up for Online Banking

Ideally, ask the bank how to apply for this service during the account opening process. 

Once you are signed up for online banking, you will not only be able to make payments online (such as your Director's salary and shareholder dividends), but you will also be able to access your company's bank statements digitally. This can save you quite a bit of money, as we’ll explain below.

The best way to send us your statements: Excel or .csv files (no additional charge)

The best way to get us your bank statements is by saving them as Excel or .csv files, and sending them to us as email attachments. The business bank statements are the bedrock of almost all company accounts. The information on them is the raw material from which we create your accounts, tax returns, VAT returns, etc. We do this work digitally, on computers, using (primarily) Microsoft Excel. If you send us your bank statements as Excel or .csv files, we can work on them almost immediately.

Second best way to send us your statements: PDF files (fee charged per statement page)

You can also download your company bank statements as PDF files, and send them to us as email attachments. However, we must convert the PDF files to Excel spreadsheet data, before we can do any work with them. We do this using OCR (Optimal Character Recognition) software, which we are charged per statement page for using. Because this costs us time and money, we must add a fee to your standard accounting charges.

The most expensive and error-prone option: Paper bank statements (largest additional fee charged for conversion to digital format)

If you do not sign up for online banking – or, if you do, but for whatever reason, elect to receive your bank statements in paper form and mail them to us or bring them to the office in person, you put yourself at a serious disadvantage.

It is very easy to mislay one or two pages of paper statements. On occasion, our clients give us a year's worth of paper statements which are missing a page or two, and we must spend time contacting them to get the missing pages sent to us. This, of course, leads to delays in our being able to do the work, and submit the accounts / tax returns / VAT returns etc to the authorities. And of course the authorities raise a lot of revenue from late filing penalties.

But let’s assume you’ve sent us a complete set of your paper bank statements, in good time. We  still need to get them into Excel, in digital form. For every transaction, a member of our team has to input each date, amount, and transaction narrative, typing them manually into a spreadsheet. The results then need to be checked, to ensure no inputting errors have been made. This is an extremely time-consuming process, which costs us money.  We will need to pass these additional costs on to you in the form of additional charges over and above the fixed fee you pay us for your accounting services. The time cost will vary according to the number of transactions for a complete set of bank statements. A typical cost for a simple, small consulting company is in the region of £150 - £200 a year, but can easily go over that figure.

Obviously we will seek to minimise such charges. If you provide a complete set of paper statements, we can sometimes still scan them, save them as PDFs, and use our OCR software to convert the PDF files to excel spreadsheet format. In those cases, we won’t charge for manual data entry, but you will still be charged per page for use of our OCR software and time.

However, if you have written all over your bank statements, or they are fuzzy copies, or if for any other reason they are not readable by OCR software, then we will have to enter every transaction manually – and that will cost you more money.

Banks make it very easy to download your statements in digital (Excel or .csv) format. Remember that if you do not provide your bank statements in excel or csv format, you are at a disadvantage.  You (or more likely, your accountant) will need to spend additional time getting your bank statements into usable format before any serious accounting analysis and preparation work can begin. 

2. Do Not use company money to make non-business purchases

This may seem so obvious as not to warrant inclusion.

Sadly 20 years' experience shows otherwise.

If you use company funds to pay for private (ie non-business) purchases then the accounting and tax consequences are as follows:

a. The purchase does not qualify for inclusion into the company's profit and loss account - in other words, the amount does not go towards reducing the company's taxable profits

b. In most cases, company and tax law do not allow us to explain these payments away as "salary" or "dividends".  Instead we need to account for these drawings on company funds as a loan from the company to you.  Such loans, unless repaid before the company year end, attract a 25% tax charge in the company.  And, unless the shareholders ratify such transactions, they are also unlawful.

3. Download Your Bank Statements Regularly

We use Barclays, and we find that Barclays online banking facility only holds the most recent 150 - 200 transactions in their cloud, available for us to download as a spreadsheet. 

We know that for our firm, a typical month will contain about 200 transactions  through the company bank account. Hence we download our bank statements in excel format at least once a month.

You might find it easiest to diarise on the first day of each new month to download last month's bank statements and save them as an excel spreadsheet.

You may prefer to do this quarterly - but if you choose to download quarterly and you put a lot of transactions through your company bank account, beware being unable to download information for the whole quarter.

4. Use the Company Debit Card Whenever Possible to Make Purchases

Try to make all business purchases either with the company debit card, or by online banking.

 When you pay for a business expense using the company debt card, the transaction is automatically recorded on the company bank statement, usually in sufficient detail  for its inclusion into your company accounts.

When you send us your company bank statements and you have made a debit card transaction, we will see the date, amount and the supplier name. eg we can see "31 Jan 2015.....£50.....First Great Eastern Rail"
…and hence we can enter £50 against "travel expenses" in the company profit & loss account without bothering you for more information.

5. Write Complete Reference Detail When Paying by Online Banking

When using online banking, try to make the reference you type in as clear as possible - so that when you download your bank statements, they will tell as clear a story as possible. This saves us time, which saves YOU accounting fees.

E.g. we will see "28 Feb 2015.....£815.... JRC Salary", and we will have enough information to enter this transaction into the company accounts without troubling you further.

6.  Lock Away the Company Chequebook

Or at least, try to limit using the company chequebook to a bare minimum. 

Every time you write a cheque, all we will see on the  company bank statement is "12 March 2015....Cheque 10000001".  We will have no idea what the cheque was written for, and hence no idea how to disclose this expense  in the company accounts.  So, if you use the company chequebook, we will need you to write up an additional spreadsheet with details of each cheque written - a sort of digital version of your chequebook stub. Most clients loathe this, and rapidly get into using the company debit card, where the retailer and your bank provide the narrative details automatically and it just appears on the bank statement.

7. Do Not get a company credit card

Banks will try to get you to sign up for one. Whether you are tempted by whatever inducements are offered - air miles / cash back / whatever, we strongly suggest you do not get a company credit card.

Our reason is that the moment you start to use a credit card, you have just doubled the number of statements we need to review (and as in 1 above, convert to excel). Rather than just a year's worth of bank statements, we will now need to review and analyse a year's worth of credit card statements as well.  This will cost you additional fees.

Of course, if there is an overwhelming reason why you want or need a company credit card (eg free travel insurance or better theft and fraud cover) then go ahead. But (for a typical JC&CO client), if you do so, then please mentally add £150 - £200 to your annual accounting fees when you are deciding whether or not to proceed.

8.  Don't Draw Cash From the ATM Using Your Company Debit Card

For the same reason as in (6) above, try NEVER just to take cash out from the company bank account – unless you are prepared to write up a cashbook telling us exactly what the cash was spent on.  Remember, all we will see on the company bank statement is something like: "15 March....ATM....£100".

If you are anything like me, by the time comes to prepare your accounting information, you will have forgotten what the money was for and will probably have lost the receipt for whatever it was you bought.

When all we have on the company bank statement is "cash drawn - £200" and no other explanation is provided, we have no option but to account for it as either a loan from the company to you, or (if legally permissible) as a dividend. Neither of these items get your company any corporation tax relief, and both have potential to create additional  tax consequences (almost never good ones) which are beyond the scope of this article.

9. Encourage Your Own Clients to Pay You by Online Banking

If your customer pays you in cash or by cheque you will need to spend valuable time queuing up and paying it in at the bank.

Further, if all we have to go on is your bank statement, we will see something like "30 June 2015.....Deposit....£300".

We will have no idea from this if the £300 relates to the company's sales –  which MUST be included in the company's taxable income – or if something else is going on (eg the £300 deposit is actually you, lending the company £300 of your own money).

If your customers insist on paying you in cash or by cheque, you will need not only to spend your time at your bank depositing the money, you will also need to write up a deposits or paying in book.


I set out to write a list of "DO's".  A short, positive, helpful list.

In the interests of spelling out WHY I am recommending the DOs, I fear I have written what may look like a long and unpleasant list of "DONT's". Trying to keep score below, I make it 6-4 to the "DO's".





Sign up for online banking

Write cheques unnecessarily


Regularly download your bank statements and send to us in digital format (Excel or .csv files)

Use the company bank account to make private (non business-related) purchases


Use clear narrative when making online banking transactions

Draw cash from the company ATM unless it is an emergency. If you have to draw cash, make a note of what it relates to immediately.


Encourage your own clients to pay you using online banking

Apply for a company credit card.


IF you deposit cheques or cash, write up a paying in book (ideally as a spreadsheet)



IF you write cheques or draw cash, write them up in a chequebook or cashbook analysis (again, ideally as a spreadsheet)


The above will help you keep better and more quickly and easily prepared records. Your accounting fees will be lower. And you will not be one of those clients whose regular (and quite understandable) complaint is "why do accountants always charge for hidden extras?" The answer is quite often "because some clients always create extra work".

I hope the above goes some way to explaining the situation.

We understand that most of our clients like the idea of a fixed fee structure.

But we think it would be  grossly unfair for Client A (who follows all the guidelines above and keeps GOOD records) to pay the same fixed fees as Client B (who uses... and loses .... paper bank statements, regularly pays non business expenses using the company bank account, who has a company credit card, and who is a heavy user of the company chequebook).

We also find that Client A tends to know where they are at, can get us the required information with minimal effort, and feels more in control and ahead of the game.

Most likely, you will have downloaded this article from our website www.chappleaccountancy.com, and so you will already have gathered that most of our clients are professionals, contractors and consultants. it is with these, our core clients, in mind that the above has been written. If you are in retail, construction or manufacturing, a few of the above guidelines (eg "do not use credit cards".... or more likely, supplier accounts) will not apply to you and should be disregarded.


Jon Chapple
15th March 2015