Setting up a business takes time, effort and money. Long days, sleepless nights, lots of elbow grease & the odd failure here and there as you work your way through. Many people when setting up a business operate the finances through their personal bank account. There is a better way and in this blog I’m going to tell you 5 reasons why you shouldn’t use a personal bank account for business.
Having a separate business account will ultimately save you time. You’ll know exactly what was bought for business use and the precise amount of money earned. When it comes to submitting your tax return your bookkeeper won’t have to wade through the entire previous twelve months on your banking app or paperwork, line by line. Instead, everything on there will be an incoming or outgoing for your business. This will save your bookkeeper time ensuring that the amount you owe is correct and also save you money as it will be less for the accountant.
Having a business bank account allows you to see exactly how well your business is doing. You’ll see where you are spending your money, where the earnings are coming from, spot late payments and also see your monthly profits, we hope! Having a stand alone business bank account lets you see just how healthy your business is.
You’ll also be able to see what shape your personal finances are in. You’ll have a better understanding on where you spend your money, what bills take up the main wedge of your income and what you are left with at the end of every month. Of course, if you’re not left with enough at the end of each month to cover what you spend you may consider increasing your salary. This could be crucial if you ever apply for a mortgage, as the lenders will want to be sure that you can cover repayments.
A business account enhances your credibility. You’ll look more professional to clients if they are paying into your business account rather than writing you a personal cheque. It’s probably not a deal clincher to them doing more work with you but it might give the right impression of you being able to handle their work in the way they expect.
If you were ever investigated for some reason or other, the official guidance from HMRC is to keep separate business and personal bank accounts. So they may frown upon your actions if you have one account for both. You’d also be able to prove that your accounts are as they should be or spot a glaring error if everything business related is in one place by itself.
Don’t let this put you off. Whilst it might take a couple of hours to get a business account set up at your local high street bank or building society and you’ll have to alter your finance details on your invoice template, in the long run you will see and feel the benefits. Make life easier for yourself now, rather than realising it is a good idea in a few years time.