Technically, if you are self-employed, you do not need to open a separate business bank account. Mind you, having said that, having a dedicated business account is advantageous; we’ll look why in a moment.
If your business is a limited company, then the simple answer is that you need a separate business account. That’s because being limited, your company is a separate legal entity.
Now we’ve got that cleared up, let’s look at those advantages that we mentioned earlier.
10 advantages of having a separate business account
You might think that you’ll be saving yourself time and money (especially concerning bank charges) by using your personal account for your business. However, as the following shows you, it might end up costing you more.
Tracking your finances
Having a dedicated business account makes it a lot easier to keep track of your business finances. At a glance, you’ll know your balance and the financial health of your business. You’ll also be able to keep a better eye on your income and outgoings.
Using accounting software
If you want to use cloud accounting packages, a separate account is a must. These services (such as Xero, Sage and QuickBooks) include online bank feeds, which import your bank transactions directly into your software, making it a doddle to keep an eye on your finances.
Now and then, it will be necessary to claim expenses. Having all your business transactions within one bank account will help you make sure everything is included and accounted for.
This is often the reason people don’t want a separate account for their business. However, a lot of banks offer new businesses free banking for a set period.
Keep HMRC onside
It’s not just a rumour; HMRC does inspect for VAT and tax. If you are picked for an inspection, it’s easier to prove your business transactions if they are all in one account.
Saving on professional fees
If you use professional services, such as accountants and bookkeepers within your business, having a separate account makes life a lot easier.
Can you imagine how long it would take to wade through your paperwork and personal account to confirm which transactions relate to your business. Having them all in one place will save a lot of time and money.
Access to finance
There may be a time that you need to consider securing finance for your business. If you operate from one account only (covering personal and business transactions), it could be difficult to get finance agreed.
However, by having a separate business account, you can build up a business credit history, making it easier to approve overdrafts and loans.
Having a business account means your customers can make payments to an account in your business name. This one won’t save you time or money, but it will strengthen your reputation. Plus, it makes it easier for your supplier to confirm who your payments are from.
Keeping on your bank’s right side
The bank terms and conditions for your personal account may state that it can only be used for personal transactions, so that’s worth checking.
Credit and debit card payments
You may want to start accepting credit and debit card payments from customers. Although several apps allow this, most (if not all) will need a business bank account.
The final word
Finding the right bank account will come down to what you’re looking for. It’s worth shopping around to find the right package for you.
Amongst the list of advantages, the most important is professionalism. Having a separate business account shows you’re serious.