In this article, you will find out how I would set up my bank accounts, if I would restart now as an entrepreneur. For “my” optimum suggestion for solution, one requires an average to very good creditworthiness.
Since not everyone can fulfil this requirement, there is an alternative suggestion with one supplier each, who waives on a creditworthiness check!
Why is this article so important?
During the last weeks, I had contact with some of self-employed persons and when I heard how and with which accounts they worked, I could not believe it.
Please do not get me wrong – there are more good banks, as we present here on our special portal.
However, if you have e.g. only one current account and use it for personal and business purposes (I have heard that quite often), then something is wrong! Even if you already have multiple accounts and still do not separate private and business use.
The account system for self-employed persons
The account system is presented in the second part of the page. Before you set it up, it is super important that you know the three following basic rules and act according to them.
Basic rule #1: Separate accounts!
The basic equipment for any self-employed – also for part time self-employed persons – are at least two current accounts:
- 1 current account for private purposes
- 1 current account (business account) for business purposes
Even if you are at the beginning of being self-employed and are with banks that charge account fees, you should not be stingy.
What is the consequence of disregarding?
This behaviour does not only mean that you run the risk of losing the overview, but also that your accountant will probably charge you more, since he/she must constantly think and decide, whether it is a commercial expenditure or not when looking at your bank statements.
And my more than 15 years of experience with various accountants taught me: in the case of doubt, accountants tend to decide that it was a private expenditure, as this avoids potential conflicts with the tax office (auditing).
As a consequence, you pay more and because of the progression also higher taxes, because the expenditures were not booked as commercial expenses and therefore were not tax deductible.
No separate accounts ⇒ You pay too many taxes!
Basic rule #2: Reserve account from the beginning
Some unfortunately often forget: Not all the money that you earn as a self-employed persons is yours!
Often, one earns the VAT for the state and must pay it at a later date. If one has profits, one also has to pay taxes on them.
Partially also without having profits, some “associations” want to take your money: chamber of commerce and industry, professional association, fee collection centre, etc.
The payment requests arrive mostly staggered.
Why Frank almost had to file for bankruptcy …
My friend and entrepreneur Frank is a consultant and had made extremely good deals and earned a lot of money last year. His account filled up and he felt very rich. So he began to make expenditures: He bought a Harley and afforded himself and his wife a generous journey to the USA.
He repressed the fact that some of the money did not belong to him, even though it was in his account. The “bill” was presented to him after filing his tax return. A hefty additional payment of almost Euros 150,000 + higher prepayments (because the tax office assumed that his business will continue operating at the same level).
Nowadays, Frank cannot financially or timely afford any vacation, because he has to chase his customers. He now feels a high oppressiveness to earn money in order to pay the tax debt from last year and the new advance payments.
He would have avoided all of this, if he would have set up a reserve account for the expected tax and other payments from the very beginning.
How to make it better:
Necessarily, set up a savings account where you create reserves every month (!). Best is to save the reserves in percentage terms according to the business success, for example, 30 per cent of all revenues.
If you choose a call money account instead of a current account – the interest rates will be anyhow very low, – you can give the tax office a permission to direct debit from this account.
With this, you set up an automatism, which runs completely by itself once set up and hardly needs any further intervention. You can concentrate on your business.
You discuss the amount of the reserve rate at best individually with your tax advisor.
Without reserve system, the probability is high that your business will sooner or later die!
Basic rule #3: Pay yourself a salary
This phrase is used by many financial coaches. I heard it for the first time by Bodo Schäfer, but he might have learned it from someone else too.
The salary of the entrepreneur must be included in every service and in every product, if the business should continue to exist. Furthermore, I will only deal with the account specific aspects.
In the classical case, the self-employed person makes a “private withdrawal”, often in cash, from the till. This is simple and fast. And perfect to lose the overview. Additionally, this does not help from the banking point of view!
Much better is a monthly transfer from your business account in the same amount to the private current account. You can write “Salary payment August” in the purpose line or at standing orders “salary payment of current month”.
Whenever you need it, you can proof a regular salary based on the bank account statement.
Professional “salary payment” instead of irregular private withdrawal will assure you an overdraft facility.
It would be even more professional, if you would use a real business account and would encode the payment with the transfer key “SALA” using a special banking software.
Through the coding “SALA”, the current account bank automatically recognizes that it is a salary payment and will automatically set up an overdraft facility, as at the DKB, or grant it without much investigation.
How can I encode payments as “SALA”?
This requires a special banking software.
Alf-Banco is one of the best and safest, which is developed and maintained in Germany (Baden-Württemberg).
Here you can start the download ► Alf Banco special version (60 days free trial).
Part 2: The account system for self-employed persons
Feel free to discuss it through the comments feature
One can discuss how to set up the account system with the appropriate banks via the comments feature at the end of the page. Please read beforehand an important fact, as well as the table with my bank proposals.
This fact is not known to many:
Before an online account opening at the German direct banks with the best conditions (free account management, etc.), an income and creditworthiness check is always carried out.
These usually include assessments of the major creditworthiness rating agencies, such as the Schufa and the like.
The business models of free banks expect a good use mostly only over a few years. Other providers charge fees. There, it is much easier to get an account.
In the following table, I make suggestions for both variants. Except for the Postbank, I have a bunch of own positive experiences with all proposed providers.
I use these accounts myself!
Suggestions on how to set up the account system for self-employed:
|1. Top accounts with income and creditworthiness check|
|Online account without cash deposits:
Business account of the Deutschen Skatbank:
Current account “DKB Cash”:
|Online account with cash deposits:
Business-Giro of the German Postbank:
|2. Top accounts without income and creditworthiness check|
Onlinekonto by PayCenter: