Someone recently found the blog on the term ‘what bank should I use as an instructor’?
The answer is simple: It doesn’t matter who you bank with.
All you need to be able to do is pay money in and get it out when you need it. As a sole trader, you really don’t need a business account (which usually has a monthly fee of between £5-£10, and extra fees for depositing cheques), but if that’s what you want then it’s up to you. Some banks will try to insist you have a business account if you bank with them, but my advice would be to find another bank unless you’re happy to be charged for something most will provide to instructors and sole traders for free,
Personally, I bank with Halifax, and all my money goes into and comes out of the same personal account. The vast majority of my driving instructor income goes in via my PayPal Here card reader and PayPal account. Less often, it goes in via bank transfer or a direct PayPal payment. I never accept cheques as lesson payments now, and I only ever get one if I’m being paid by a corporate source (another bank, insurance companies, and so on).
Cheques were the only source of payment problems I ever had. I can’t remember any ‘bouncing’ because pupils didn’t have the funds, but I was always conscious that they could. The main source of problems was how they were filled in – missing numbers or my name spelled wrong, or smeared. It didn’t happen often – but it happened, and it was made worse by the fact that the bank can take weeks or months before sending it back, which you wouldn’t know unless you were looking at your account every five minutes. However, the main drawback was that cheques have no immediate value until you have banked them, and when I first started, the vast majority of pupils paid this way. So if I wanted to maintain my cashflow – and when you’re starting out, you most certainly do – it meant frequent trips to the bank.
Unfortunately, though, even now about 20% of my turnover is still cash, and I can easily accrue several hundred pounds in little more than a week. So I still have to physically pay money in occasionally (though I’m no longer in a major hurry to do so) by way of the ancient pantomime known as ‘going to the bank’.
I have to be honest and say that Halifax is utterly crap as far as its branches are concerned. To start with, they don’t have many left, and those they do are located in places where you find a lot of idiots (e.g. West Bridgford and Arnold shopping precincts). First of all, you have to find somewhere to park, and in West Bridgford that means having to pay (and the traffic wardens hunt in packs, ready to nab you if your ticket has a crease in it or is placed crookedly on your dashboard). In Arnold, if you’re lucky you can find a free roadside spot, but if not then you have to pay there, too. West Bridgford town centre during the day is like a geriatric village of the damned, and even if the car park has spaces, there’s a good chance you won’t be able to get to them because of elderly and disabled drivers stopping next to the fully-occupied disabled bays waiting for someone to move (or trying to avoid buying a ticket while they wait for their partner to come back from shopping). In the afternoon, mummies in Chelsea tractors do the same as they pick their kids up in the car park, or wait for a space near the shops instead of driving round the other side where there’s lots of empty places.
If you do manage to park and get into the Halifax branch, the size of the queue at the till (and the complexity of the transaction each member of it is trying to complete) is inversely proportional to how big a hurry you are in. There’ll be women with pushchairs whose kids are running around screaming, people with bags of coins, those making withdrawals as if they’ve never heard of a cashpoint, and several elderly people with bank books who behave as though they’ve never done this before when they get to the till (and who then go straight to the cashpoint to make sure the money has gone in, and often to take some out again less than five minutes after putting it in).
The number of cashiers on duty is not proportional to anything. They only ever have one unless the number in the queue is approaching three digits. Then they still have one. But sometimes two, although that isn’t proportional to anything either.
On the rare occasions I have used the cashier, the simple act of paying cash into your account takes five minutes. This, too, isn’t proportional to anything. It just takes five minutes – possibly a bit longer if you have a lot of cash and what they count isn’t the same as what you counted. The vast majority of that five minutes is taken up by their printing device, which takes nearly that long to chisel your receipt on to small clay tablet.
Of course, there is the Fast Deposit machine. This miracle of technology does exactly the same thing as the cashier, and it even takes exactly as long as the cashier. All without involving the cashier at all. Brilliant. Except that Halifax branch staff have been encouraging as many people as possible to use it to try and keep the queue for the till inside the building. Many of those thus encouraged seem incapable of understanding that those little metal things called ‘staples’ and ‘paper clips’ are not supposed to go into the machine, so it is frequently not working. And even when it is, if there’s more than one person waiting to use it, you’re no better off than standing in line waiting for the till. It was that which led to my last ever visit late last year.
I went in, and there was the usual queue for the single cashier. There was only one person at the Fast Deposit gizmo, but it quickly became clear he was having a financial discussion of some sort on his phone. He had several cards and a thick wad of cash. He wasn’t actually using the machine, but he was going to, and the supernumerary cards suggested the money wasn’t all going into the same account. So he was effectively three or more people – all of them f***ing stupid – all by himself. I stormed out – I swore audibly – and when I got home began looking for another bank.
If I’d have calmed down a bit, I would have realised that it was going to be the same whoever I banked with if I needed to visit a branch. Years ago, while I was with HSBC, I went into the now closed branch in Keyworth, only to get stuck behind a local farmer who was paying in hundreds of pounds in coins! And whenever I used to go in NatWest or Barclays, the cashier getting up and disappearing in order to deal with whatever the idiot at the front of the queue was trying to do would make my blood boil. But it was while I was angrily looking for a new bank that I discovered I was now able to pay into my Halifax account at the Post Office.
At first glance, this might not seem the panacea it has turned out to be. That’s because the people who frequent Post Offices are a hundred times more stupid than those at the bank branches. I recently got stuck behind someone who was apparently an eBay seller, and they had at least 30 small packages, each of which had to be individually bagged and labelled for some unfathomable reason (when I sell on eBay, I bag and label at home and only use the Post Office as a drop off if they won’t fit in a post box). Or in the village branches, they are gathering places for the elderly to have a chat, often with the elderly Postmaster (who also runs the tiny general store it is attached to), and if you walk in as an unfamiliar face, that chat takes absolute precedence over whatever it is you want to do. But the major advantage is that there are a lot of them, parking is usually a doddle, and there is always one either very close to home, or along the route as you are driving between lessons. And paying cash or cheques in at a Post Office is quick – I am usually in and out in less than two minutes.
I don’t know how long I’ve been missing out on this, because I looked into a it a few years ago for precisely the same reasons as I did this time and the service was only provided to the big banks (which didn’t include Halifax). But it seems to be almost universal now.
Why don’t you accept cheques?
There is no need. Anyone who uses cheques to pay for stuff will have a cheque guarantee card, and these days those things are chip & pin cards. Since I can take card payments, a cheque is a pointless complication. The only possible benefit to a pupil who wanted to do it would be to defer payment by however long it takes for me to bank it, plus however long it takes my bank and theirs to process it. If I didn’t pay it in immediately, there’s an increased chance that they will be skint again by the time I did. For me, there is no benefit at all, since it forces me to go to the bank if I want the money, and that is just wasted time and all of the hassle I have already outlined.
Other instructors take cheques
That’s because they can’t take card payments, meaning that unless they get paid in cash (including driving the pupil to a cashpoint to obtain it), or do it by bank/PayPal transfer, a cheque is the only alternative. Getting pupils to pay by bank or PayPal transfer is a hassle in itself, as is driving to cash machines a lot of the time (especially when they’re out of order or there’s traffic). When mine do it by transfer, I often have to keep chasing them because they ‘forget’. I’ve got better things to do,
What if people can only pay you by cheque?
I would imagine the number of people in the entire country who are truly in that position could be counted on the fingers of one hand. If they can write cheques, they will need a cheque guarantee card, and that doubles as a chip & pin – which I can accept directly. If the bank won’t give them one, there is probably a damned good reason for it, and I have no desire whatsoever to find out why by accepting non-guaranteed cheques from them.
As I said, I can handle cheques. I choose not to as a routine method of payment because there is no good reason for them these days as a way of paying for driving lessons. It has not been an issue, and if it ever became one then I would consider each case on its merits. It isn’t one of my accepted methods, that’s all.
Why bother with a card machine?
It’s quick, and I get paid immediately. There’s no chasing, and no risk of loss to me. Since I started using such a device nearly seven years ago I have taken well over £100,000 that way (and yes, it all gets declared when I do my taxes, as does any cash I take). It also means I have good records for tax purposes. Frankly, I wish everyone would pay by card, but it isn’t uncommon for people to have their own reasons for insisting on cash – even if it involves as much as £700 for a complete course!
Isn’t it illegal to use a personal account for business transactions?
No. You only need a business account if you are a limited company. Sole traders – such as ADIs – are operating perfectly legally if they use a personal account. The only reason for choosing a business account would be to keep things simple for when you do your tax return – but it isn’t that hard in the first place for instructors.
Note also that some banks don’t like it if you use a personal account this way and will expect you to open a business account – and close your personal one if you don’t. That’s between you and the bank’s policies, and not a legal issue.
HMRC will audit you if you use a personal account
Well, I’ve been doing this for long time and I have never been audited. I wouldn’t be worried if I was, because my accounts are clear (and true). HMRC are far more interested in you if your numbers don’t add up properly – if your profit ratio isn’t what it should be, or if your declared turnover doesn’t ring true, for example.
What I have noticed is that at least some ADIs who make this claim will also have boasted at some point how little tax they pay, and if they’re saying it because they’ve been audited, well, there’s the real reason right there. In my case, I simply pay what is required after all my overheads have been subtracted from all my turnover. If you’re honest, and doing this full time, there’s no escaping the fact that you need to pay taxes – and the annual figure when you complete your Self Assessment isn’t going to be very attractive if you haven’t been planning for it throughout the year.
Too many people start in this job, end up working 30 hour weeks, but don’t put their taxes aside as they go along. Then, at the end of the year, they need to find around £1,000 to pay their bill – usually, just after Christmas to make matters worse. Fair enough, you pay half in January, and the other half in July, but it’s still a lot.