4. Your business cash will be safer
Using one bank account for all of your personal and business finances means that you run the risk of losing track of how much money you have for each purpose.
So, for example, on first glance you may think your bank balance is healthy enough to purchase something that you want for yourself (e.g a state-of-the-art TV) but you may find you need that cash in a couple of months’ time to pay a business tax bill.
By having separate accounts youll avoid any cash flow problems that may arise from accidentally spending business money on personal purchases.
5. Youll look more professional to your customers
Dont just think about whats easiest or most beneficial for you when deciding what bank account to use for your business finances you also need to consider your customers.
Think about how they will feel about making payments to your own personal bank account or to one in your business name, and which will make you look more like a serious business owner.
No matter how small your business is, your customers want to be certain that you will provide them with a top-notch service, deliver what you promised on schedule, and be there to resolve any queries. Paying into a bank account in your own name may make your customers feel that theyre not dealing with a real business, so dont give them any reason to doubt your credentials or professionalism.
Setting up a dedicated business bank account is a very sensible move if you’re running a small business. Not only will it provide you with extra security and protection for your finances – as it’s more difficult to mistake your business money for your personal funds – but youll also have clearer, more understandable records of the money coming in and out of your business. And that could be invaluable when it’s time to complete your Self Assessment tax return.
Emily Coltman FCA is chief accountant at FreeAgent.