Contra bank account

If I open a Contra account for paying a supplier who is also a client.
Do I pay the whole invoice into the contra account, pay off the supplier then transfer the remainder to my business account?
(The supplier doesn’t actually supply any goods. It’s just a fee they charge on my invoices.)
When I set up a Contra account, which type of bank do I use? Current account/equity account/merchant account?

Thanks in advance

Hello @davepike

Which type of bank do I use? Current account/equity account/merchant account?

You are best setting it up as a Merchant account.

Do I pay the whole invoice into the contra account, pay off the supplier then transfer the remainder to my business account?

That’s exactly right

e.g.

  • Sales Invoice £100 - pay in full using contra merchant account.
  • Purchase invoice £50 - pay in full using contra merchant account.
    *Transfer the remaining £50 to you bank account.

Balance on the contra merchant account is Zero

Thank you Steve for your reply.

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