Draw actual cash from business

[Thewindycleaner]

Hi,
Im a self employed window cleaner and get around £500 of my monthly turnover in cash. The rest is mainly electronic payments. I normally deposit all my takings into a business account then pay myself a set amount monthly, by bank transfer to our personal account. However, My business bank is starting to charge for cash deposits so I’m wondering if it would be acceptable to take £500 in cash and then the remainder of the set amount via bank transfer from the business account. This would mean that all the business takings would not go through the business account, but would that matter as long as I recorded it properly?

 

[fisicx]

If you are taking a monthly wage you are an employee of the business. Which means there a number of rules you need to follow.

Talk to @Newchodge

 

[Mark T Jones]

Hi,
Im a self employed window cleaner and get around £500 of my monthly turnover in cash. The rest is mainly electronic payments. I normally deposit all my takings into a business account then pay myself a set amount monthly, by bank transfer to our personal account. However, My business bank is starting to charge for cash deposits so I’m wondering if it would be acceptable to take £500 in cash and then the remainder of the set amount via bank transfer from the business account. This would mean that all the business takings would not go through the business account, but would that matter as long as I recorded it properly?

Simple answer, yes you can do as you say. Cash need not go through the bank as long as it is recorded

 

[DWS]

If you are taking a monthly wage you are an employee of the business. Which means there a number of rules you need to follow.

Talk to @Newchodge

OP says they are Self Employed so I would gather a sole trader and not operating through a Company, in which case they can not be an Employee.

No problems with what you suggest and using the cash as drawings, just make sure the cash income received is posted correctly within the accounts.

 

[Thewindycleaner]

Thank you. Yes correct I am self employed.

 

[DontAsk]

Do you use accounting software? If so, and you want a formal process, just setup another "bank" account to record the cash transactions.

 

[Daybooks]

Your requirement is to account for all your business transactions such that you can account for your trading profits and thus any taxes due. You don’t have to pay cash receipts into the bank but can use those funds to pay for other business expenses or take as drawings. Your bookkeeping entries must reflect this.

Thus, yes you are correct in that all receipts do not have to go through the ‘business bank account’ but must be recorded. In this case as ‘cash in hand’.

Make sure all your customer invoices are properly recorded ideally with sequential numbering and cash receipts remain traceable with your bookkeeping records.

 

[Thewindycleaner]

Thanks

 

[numbersrule]

Do you use online accounting/bookkeeping software?

If yes, you could have seperate bookkeeping accounts for

1. Card Sales and Bank Transfer Sales
2. Cash Sales

Then you could set up the "bank" account which Dont Ask has mentioned within the bookkeeping software, which would normally be termed a 'Petty Cash' account.

Cash income received into Petty Cash could then be allocated as Cash Sales and would therefore be correctly recorded as Income.

Then to record that as Cash 'Drawings' would involve a 'spend money' transaction ( or however your particular software refers to outgoings ) out of Petty Cash and allocated to Drawings.

That way, the Cash has 'gone through' the books and is a visibly recorded transaction.

Any Taxation aspects can then be picked up by your accountant at year end.

 

[MyAccountantOnline]

This would mean that all the business takings would not go through the business account, but would that matter as long as I recorded it properly?

No, not a problem.

 

[Paul Kelly ICHYB]

Pay the money into your personal account and transfer to the business?

 

[MyAccountantOnline]

Pay the money into your personal account and transfer to the business?

It's not necessary and I wouldn't do that.

It's much better keeping business and personal banking separate.

 

[Paul Kelly ICHYB]

It's much better keeping business and personal banking separate.

Agreed.

As mentioned, as long as everything is accounted for, are there any issues in doing this?

 

[MyAccountantOnline]

Agreed.

As mentioned, as long as everything is accounted for, are there any issues in doing this?

It increases admin - more transactions to add to the bookkeeping, it gives HMRC open invitation to see all the private bank statements if the OP is selected for an Investigation/Enquiry, is generally a breach of bank conditions and the likelihood of having a bank branch where the OP can actually pay in cash is probably slim with so many branches closing.