Key takeaways
What this article covers, in order:
- How a $5,000 transfer turned into $10,000 of "activity"
- The correct way to record a transfer
- Common transfers small businesses make
- Credit card payments are transfers too
- When the two sides land on different days
- Checking your transfers at month-end
When you move money between two accounts the business owns, nothing was earned and nothing was spent. So a transfer should never touch income or expenses. Here's how to record transfer between accounts like that: treat it as money leaving one balance sheet account and arriving in another, and in your books both sides of the transfer should be linked as one movement.
How a $5,000 transfer turned into $10,000 of "activity"
Noah runs a mobile mechanic business in Toowoomba. In Aug 2026 he moved $5,000.00 from his everyday account into a business savings account to put money aside. Both accounts were on feeds. The outgoing $5,000.00 showed up in one account, the incoming $5,000.00 in the other.
He was in a hurry. He coded the outgoing one to "Sundry expenses" and the incoming one to "Other income". His bank balances were fine. His P&L was not:
| Line | What he did | What it did to the P&L |
|---|---|---|
| $5,000.00 out of everyday account | Coded to Sundry expenses | Expenses up $5,000.00 |
| $5,000.00 into savings | Coded to Other income | Income up $5,000.00 |
| Net effect on profit | $0.00 |
Because the two errors cancel out, his profit looked right. That's why this mistake survives for months. But his income and his expenses were both overstated by $5,000.00, which makes any margin you work out wrong and any GST coding on those lines wrong too. And if he'd coded only one side and left the other uncategorised, profit itself would be off by $5,000.00.
The correct way to record a transfer
A transfer has two sides, and both sit on the balance sheet:
- Money out of the everyday account (its balance goes down $5,000.00)
- Money in to the savings account (its balance goes up $5,000.00)
Total assets don't change. The money has just moved pockets. In most accounting software you mark the line as a transfer and choose the other account, rather than picking an income or expense category. If both accounts are on feeds, you then match the second side to the transfer you already created, so it isn't recorded twice.
Common transfers small businesses make
Not all of these feel like transfers, but in bookkeeping terms they are:
- [ ] Everyday account to business savings (and back)
- [ ] Paying off the business credit card from the business bank account
- [ ] Moving money into a separate account you set aside for tax or GST
- [ ] Moving funds between two business transaction accounts at different banks
- [ ] Topping up a payment processor or prepaid account the business owns
- [ ] Withdrawing cash from the business account into petty cash
What's not a transfer between the business's own accounts:
- Money to your personal account. That's owner drawings (sole trader or partnership) or a director loan (company). We cover those in our post on owner drawings and director loans.
- Paying a supplier, even if it's labelled "transfer" by your bank.
- A customer paying you by bank transfer. That's a receipt against an invoice or sales income.
Your bank uses the word "transfer" for almost every electronic payment. Your books use it only for money moving between accounts the business owns.
Credit card payments are transfers too
This one causes plenty of double-counting. Say Noah's business credit card statement shows $1,280.40 of purchases in Sep 2026: fuel, parts and a software subscription. Each purchase is categorised from the credit card feed as it happens. Then on 25 Sep 2026 he pays the card off with $1,280.40 from his everyday account.
If he codes that $1,280.40 payment as "Motor vehicle" or "Parts", he's counted the same spending twice: once on the card, once on the payment. The payment is a transfer from the everyday account to the credit card account. The card's balance drops to zero; the bank balance drops by $1,280.40; expenses don't change.
When the two sides land on different days
Transfers between accounts at the same bank usually land on the same day. Transfers between banks can take a day or two, so you might see the money leave on 30 Sep 2026 and arrive on 1 Oct 2026. That's across a month-end.
Here's how that looks when you reconcile Sep 2026:
- Everyday account: shows the $2,500.00 leaving on 30 Sep 2026. Reconciles fine.
- Other bank's account: hasn't received it yet. Its Sep 2026 statement doesn't show it.
Many bookkeepers handle this with a clearing account (sometimes called "funds in transit"). On 30 Sep 2026 the money moves from the everyday account into the clearing account. On 1 Oct 2026 it moves from the clearing account into the second bank account. At 30 Sep 2026 the clearing account holds $2,500.00; on 1 Oct 2026 it goes back to zero. Each bank account reconciles to its own statement, and nothing is lost in between.
If your clearing account still shows a balance weeks later, one side of a transfer was never recorded or matched. That's worth chasing straight away.
Checking your transfers at month-end
A quick check each month catches nearly every transfer mistake:
- Search your income accounts for anything with "transfer", "TFR", "savings" or your own name in the description.
- Search your expense accounts for the same.
- Look at your credit card payments and make sure they're transfers, not expenses.
- Look at your clearing or transfer account. It should be zero, or hold only transfers that are genuinely in transit.
- Reconcile each account to its statement.
How HelloBooks helps
HelloBooks lets you connect your bank account and card accounts (most Australian banks and cards), or import CSV statements, so both sides of a transfer come in from the bank. They land in a review list where you confirm or change the category. Credit-card accounts reconcile the same way as bank accounts, and the reconcile screen shows an AI match suggestion on each statement line, with a confidence score and the reason for the match, so you can check a transfer was paired with the right line. The Free plan includes one live bank feed plus CSV import; Pro (A$30 a month) has unlimited bank connections, which helps when you want every account on a feed. Read more about bank reconciliation and cash flow management.
FAQs
Does a transfer between my own accounts need a GST code?
No GST applies to moving your own money between your accounts. Use whatever "not reportable" or "no GST" option your software offers so it stays out of GST figures.
Is paying the business credit card an expense?
No. The purchases on the card are the expenses. Paying the card off is a transfer from your bank account to the card account.
What if I only have one account on a bank feed?
Record the transfer from the feed side, then enter or import the other side for the account without a feed. When you import that account's CSV, match the incoming line to the transfer instead of recording it again.
Why does my transfer clearing account have a balance?
Either a transfer is genuinely in transit across a month-end, or one side was never matched. If it's been more than a few days, look for the missing side.
Is a transfer to my personal account a transfer?
Not in the business's books. It's owner drawings for a sole trader, or a director loan for a company. Your accountant can advise on the tax side of director loans.
Money moving between your own pockets is neither income nor expense. Get that one habit right and your P&L will thank you.
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