As more and more people are leaving full-time employment to set up their own businesses, it’s of the utmost importance that they get their financial affairs in order first. And this means setting up a business account that’s independent of any personal accounts.
Here are our top reasons you should keep your personal and business finances separate.
Perhaps the most obvious reason to open a business bank account is that having an account that’s separate from your personal one will help when it comes to filing tax returns.
If you’re not confident with finances, consider getting an accountant. Although it may seem like an added expense, it’s better than being fined for filing incorrectly. Because the law requires every single transaction is traceable and transparent consider using prepaid cards for business accounts instead of cash transactions for a paper trail that’s easy to follow.
If your personal and business money is combined it can be all too easy to dip into company funds for personal reasons. Avoid the temptation by keeping accounts separate.
Limit the number of people who have access to the business account to reduce the risk of accounting errors, as well as to protect your finances. It’s also worth checking your bank statements regularly to monitor transactions.
Keep all receipts, and make sure they tally with the transactions recorded. By keeping an eye on your cash management in your business fund, you can make certain you have enough money in the account to pay for business costs.
It can be difficult to prove to the government that you’re trying to run a legitimate business if your finances don’t reflect this. Similarly, businesses can deduct business expenses, whereas, if you’re using a personal account for business expenses, it can appear to be a hobby. Because of this, you may not be eligible to claim for certain business expenses.
When your business operates from its own, separate business account, it demonstrates to your clients that you operate a professional business. In the same way a website shows you’re serious, so too does a designated business account.
Alarm bells often ring for customers if the account they are paying in to is a personal one, as it could be a fraudulent business.
Starting a business can be a daunting feat. Now matter how big your business is, you’ll want to treat it as such from the beginning to give it the best chance of flourishing. While many business accounts charge a monthly fee, it’s important to find one that is most suitable for you. If you think your business will often incur transactions in foreign currency remember to look out for any fees surrounding exchange rates. If you are unsure of anything surrounding your business finances, always seek professional advice.