Business bank account vs Personal bank account: The debate
For many contractors, starting-up your business can be both exciting and nerve-racking in equal parts, and making the right decisions during this time can really help you kick off in the right way. One of the first choices will be if you want to try and manage your business finances just using your personal bank account or if you want to open a separate business account.
While it may seem easiest to just use your personal account, having a business bank account from the off can be hugely beneficial so let’s run through exactly how it can benefit your business.
Do I need a business bank account, or can I just use my personal one?
Keeping your business and personal finances separate makes managing your finances a lot easier. Imagine having to scroll through pages and pages of statements whilst having to pick out the business transactions from the personal ones. You’ll be saving time and effort with a designated business bank account when it comes to tax returns. It’ll minimise the potential for mistakes which could mean penalties or fines - something which you may encounter if you only had one account. With the introduction of the Making Tax Digital initiative as well, using a personal account will make everything more complicated and disorganised so it’s recommended that you have a business account.
Could it affect how professional I come across?
Having a business bank account could help you appear more credible to customers and suppliers, especially if you’re just starting out. They would be making payments into an account under a business name rather than an account under your own name. Some customers may be sceptical of paying into a non-business account.
Will my Terms and Conditions affect if I’m allowed to use my personal one?
The terms and conditions of your bank account may not be the most exciting read, but they’re definitely important. If you were considering using a personal bank account for your business, then you’d have to check your T&Cs and make sure that you’re even allowed to do it. If you use your personal account for your business and your bank realises, they could even decide to close your account and tell you to open up a business one. So to save yourself time and hassle, it’s easier just to open a business account from the start. You should think about any legal requirements as well, for example if you’re a limited company you must operate all finances through an account held in your company name.
What if I want to get credit?
As your business grows, you may find that you need a little financial help from your bank to be able to expand. If you’re using your personal bank account, then getting credit to fund your business expenses might not be easy. Having a business account and being able to prove your financial track record will put you in a much better position when it comes to requesting credit. And if you’re thinking about getting a contractor accountant in the future, you might need a business bank account for them to be able to work with you.
What’s the best account to measure my business performance?
Knowing how well your business is performing will not be an easy thing to manage if you’ve just got one bank account. Separating them out will mean that when it comes to investigating your cashflow and looking at any forecasting, it’ll be a much simpler process than if it were your personal account.
Starting off on the right foot is important when it comes to your new business and having the right bank account is an important first step. A business bank account means easier, faster management, seamless record keeping and tax returns made easy, as well as a better credibility and potential access to extra business finance.
The Cashplus Business Account is a great way to kick-start your new business. With an application that just takes minutes to apply and an instant online decision, you can be off and running in no time! To find out more, click here.