Five reasons why you need a business bank account
Just starting out in business? Or still in your early days, and wondering whether you need a separate bank account? Read five reasons why you need a business bank account.
One question we often get asked when we give talks on starting a business is whether you need a business bank account. And our answer is always “yes”.
It’s not just large corporations who can benefit from keeping their finances separate in a distinct business bank account. We believe that every serious start-up (and freelancer) should set one up from the start.
Five reasons why you need a business bank account
To help explain why it’s beneficial, here are five reasons why you need a business bank account.
1) You’ll get it right from the start
Don’t wait until your business has taken off to set up a business bank account. Making sure you have a business account right from the start will save you a lot of hassle in the long run.
Just think of the unnecessary work you’ll need to do if you decide to change once your business is established. You’ll need to inform your customers of new bank details, and change bank details with suppliers.
You may also need to edit and reprint invoices and other documents, and edit all your online software subscriptions. It’s much easier to begin with a distinct, separate account for your business from the start.
2) It helps you manage your business revenue
By separating and organising your personal finances from your business finances you will be able to better manage your cashflow and ensure that your business income does not get swallowed up by your own personal expenses.
This will provide you with a clear view of what’s coming in and what’s going out, enabling you to keep on top of your cash-flow and giving you a better idea of your business’ financial health. It also makes it easier to make decisions with financial implications.
3) You’ll look more professional and credible
Having a separate business bank account will send the right message out to your customers and suppliers. It will also help reinforce your brand awareness as, rather than your customers paying you, your customers are paying the business, which will in turn give you more credibility.
4) It leaves an audit trail
If you ever find yourself being audited by the Inland Revenue you will be required to show a full complete record of your financial accounts. If your business finances haven’t been separated you could find yourself in a pickle which can get very messy.
It’s much easier to start the right way and separate your finances from the beginning. This way if you ever do need to review or show your business records, they’re all clearly in one place.
5) It helps you view your business as a separate entity
Much of business success comes from mindset. And having a proper business bank account can help put you in the right frame of mind, by viewing your business as a serious thing that is separate to yourself.
Having a separate bank account means that all expenses and profit go through that, making it easier for you to track of all transactions for auditing purposes, and to actually pay yourself.
So rather than taking money out from a central bank account if there’s any available credit, you can see exactly how much your business is earning and pay yourself. And what nicer feeling can there be in business than paying yourself a well-earned salary?
Photo by Ilya Yakover
