By Angela Backhouse, Accountant at Hive Business.
It still surprises me when I come across a new client who doesn’t have a business bank account. I am often asked ‘do I really need to have a separate bank account for my business?’ and my answer is almost always YES!
In some cases, you may have no choice but to open one. If you have set up your business as a limited company, you are required to keep its finances separate, as the company is classed as a completely separate entity.
However, if you’re self-employed, the answer is still very likely to be yes.
It may be very convenient to try to run your business using your personal bank account but if you are serious about improving your business, having your business finances in a separate account keeps you in control of your income and expenditure and overall financial position.
Even though finances can be tight when you are starting a business, keeping your finances separate ensures better manageability.
Some banks offer free banking for a trial period, which can help to keep down costs. It’s worth noting that business banking fees can be alleviated by the fact that bank fees are allowable business expenses. The same can be said for bank, overdraft and credit card charges.
Further savings can also be gained when it comes to completing your end of year accounts; having a separate bank account can make things easier for you and your accountant. If you or your accountant have to go through the whole of your personal bank account, this will be very time consuming; using a separate account will streamline the transactions that require analysing and, more importantly, if your accountant is doing this for you, it will ensure that they can identify and claim all business expenditure for you.
When selecting a business account don’t just assume you that should simply use the same bank as you use personally. I recommend using comparison websites to see who is offering the best deals for business accounts. Make a list of the most important things you need in a bank account and consider the following:
- Will you need to bank cash and/or cheques on a regular basis? This would mean that you need a bank that has a branch nearby for you to visit easily.
- Do most of your clients pay by card or bank payments for your services? Or do you pay your suppliers by bank payments? Then a bank offering the best online services may be the perfect solution for your business.
It is worth noting that it is not as easy to switch a business account as it is to switch personal accounts, so it is very important that you make an informed decision to make ensure the account is right for your business.
If you would like to discuss Hive’s services and find out how we can improve your financial performance please call 01872 300232 or email us at hello@hivebusiness.co.uk.
