Business
There are a number of different obstacles that you might run into as a small business owner, especially in the finance section of your business.
It is entirely understandable too since everything can feel a little overwhelming when you handle your own finances and can at times be very confusing. When starting out, you may have considered combining your regular banking with your business banking.
It is important to note that if you are trading as an LTD company, you are legally required to keep a separate account in the name of the business. If you are a sole trader, you are not legally required however, we do advise that you do not do this for several reasons. In fact, we would say that having them separate will be optimal for your business! Read on to find out more…
It is easier to identify expenses so, it keeps a more accurate financial record!
Whether you have a small business or a large corporation, either you or your accountant will be required to submit yearly tax returns to HMRC. Therefore, having your personal and business finances separate, makes it easier to assess which transactions relate to each side of your finances. Trying to recollect the correct information potentially months down the line is near impossible therefore, eliminating the risk of error straight away is absolutely key.
Assists with legitimacy and remaining professional!
Customers are always looking to ensure that the business they purchase from is entirely proper and professional. Therefore, asking customers to transfer money into a personal bank account, can give the impression that you are not a ‘proper’ business. As a result, this could negatively impact your brand awareness as people are unlikely to recommend you if they do not feel the service was of a high enough standard.
Paints a clearer and more realistic picture of the general health of the business!
Keeping your finances separate, will assist you with tracking your business’s cash flow and allow you to plan accordingly. Also, it will act in your favour should you want to apply for a loan or a particular funding program as everything is clear, concise and in order without added work to filter out personal expenses.
Most banks will not allow you to combine your finances!
In the terms and conditions of your contract with your bank, it will more than likely state that a personal bank account is not permitted to handle business purposes. If the bank does find out that you are in breach of this contract, you are highly likely to end up on the bank’s blacklist thus affecting both you and your business’ credit score.
Reduces the risk of online fraud!
Both mobile and online banking are luxuries in the modern world that we take for granted. Being able to pay bills, transfer money, check your balance and contact the bank at any given time is a huge advantage compared to methods of the past. However, similar to how all of this has moved online, so have the cybercriminals that want to steal your money! Any account being breached is an absolute nightmare however, combining your finances, opens the door to even more risk and disaster!
Overall, it really is just much safer for you to keep the two separate. If you are struggling with your banking and keeping your bookkeeping as clean as possible, you can contact us here for more advice!
