This continues our 10-part series of best practices for business owners.
Best Practice 7: Set up separate bank accounts for payroll taxes withheld or sales tax collected
Sales tax is monies collected on behalf of the state, and later reported and paid. These monies go into cash flow and often get spent. A best practice to avoid this is that every time sales tax is collected on a sale, move the monies collected for sales tax into a separate bank account so that you have the funds available when it is time to report and pay sales tax to the state.
Payroll taxes are the responsibility of the business even after paychecks have been issued to the employees. Moving those monies to a separate bank account helps business owners ensure they have the funds allocated when it is time to make tax deposits and report payroll taxes to federal and state agencies.
Keeping the taxes you owe separate when you collect them makes it harder for those funds to be used for general business expenses. It will keep you on target to pay the taxes timely and maintain accurate records.