If you are a new business owner or independent worker and you are trying to figure out the best way of administering your finances, read on. One of the first questions one asks when launching a business is if and why one should have a business bank account.
Separating business from personal transactions is generally a good idea for any business whether you are self-employed or a limited company.
Separate Personal and Business Expenditure
Handling all your business transactions from a separate bank account makes it extremely easy to check your balance, and your expenses and create reports for accounting. Theoretically, you can open a new personal account to get this separation, but there are further advantages to going with a banking product designed for business.
Instant Syncing with Your Accounting Software
Accounting uses special software that can synchronize with your bank feed and update instantly, as you use it. If you would link a personal account to your software, it would be very hard to filter out business transactions only. Boost your productivity with this feature you can find in most accounting products (Quickbooks, Xero, Sage, etc.).
Easy Expense Recording
Using a dedicated bank account (and card) for your business makes it a lot easier to track all your business expenses, which is very important for accounting and auditing.
Bank Fees as Allowable Expenses
While business bank accounts allow you to claim the fees as an allowable expense, personal bank accounts don’t.
Audits from HMRC Are Simpler
If a tax officer audits your business finances, it will be much easier for them to navigate through a business account report. This helps you, as it decreases the chance of misunderstanding and reduces the time you have to dedicate to the audit.
Lower Bookkeeping Cost
A bookkeeper will charge for the time they take to separate your personal expenditures from your business ones. Save money by not having them mixed at all.
Access to Business Loans
You will build more credit points and will be able to get bigger loans from a business bank account, as personal expenditures would not justify a more substantial claim. You will also be more likely to receive overdrafts for a business bank account.
You Will Look Professional
Having a business bank account adds up to your credibility, as some customers might be wary of paying to a personal account. Suppliers will also favor businesses that have a business bank account for transactions.
Some Payment Gateways Require Business Bank Accounts
If you want your customers to pay via Stripe, GoCardless, or other payment gateways, you might need a business bank account. Varied payment options are an advantage for any business.
As you can see, banking products dedicated to businesses exist for a reason, and banks offer plenty of benefits to the clients using them. If you are a business owner, prospect the market for business bank accounts and choose the best fit for you.