Running a business isn’t easy, be it small or large scale. There are several things one needs to consider such as clients, relations, managing inventory and most important finances. A lot of business owners mix their personal finance with business finance leading to disaster in running a successful business. Money involved in running the day-to-day operations is often mixed with misconstrued with personal finances and expenses. This is often due to existence of one single bank account for managing inflow and outflow of funds. Business owners do not understand the importance of separating personal account and ensuring a separate account for business finance.
If you are a small business owner and having a separate account for business confuses you, then this article with help you understand the critically and benefits of having a business account for finance.
Keep your personal finances separate
Most obvious reason to
hold a business bank account is to keep your personal transactions separate you’re your business which you can later keep a tab on. Also, one of the key reasons to have the two activities separate is to protect account holders from contingent liabilities in event of workplace incidents or third-party law suits. Some business owners might think that just by registering as a separate entity would project them from these liabilities which is not the case.
Simplification in accounting for taxes
The
IFRS accounting standards require that the business owners hold a separate accounting for all business transactions. While it is not a mandate but setting one up definitely helps in hassles related to tax filings and return at a later date. In certain jurisdictions, small business owners are required to pay taxes quarterly which would become cumbersome if we do not have a separate account statement for all business activities. You would end up taking stock of relevant transactions, calculate your actual business income and expenses. This could be a time consuming and a tedious process.
Separate business account allows you to accept credit card payments
The ability to accept credit card payments is one of the biggest facilities of opening business account. Many business owners deal with transactions on a day-to-ay basis which will not always be through debit cards. Having a personal bank account will not offer you this facility without having a payment service provider as a middle man. Business bank accounts are already set up with this feature and proves to be a great trade off for the fee you pay to get a business account
Gives your business a professional branding
Holding a business bank account not only comes with the facilities that it offers but also provides other softer aspects such as a good
brand image, professionalism in the services being provided. Infact, not having a business account and relying on your personal account would create confusion as your personal account name and business name would be two different identifies. People would not be able to have a lot of resemblance with the work you do and would also not help in building trust. A business bank account would put the name on each financial touch point such as credit card, business loan, and other payment methods building trust.
Build a strong relationship with bank
With a personal account there are certain restrictions and limitations as to how much you can hold and take out. But having a business account provides flexibility and builds a professional relationship with the bank
Small business owners will be able to
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Avail loans based on business needs solely based on the rapport developed through the business bank account
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Keep the interest rate and borrowing fees separate while filling for taxes
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Allocate credit card to your employee
Access to several incentives from banks
The best way to open up a business bank account if to open in the same bank in which you have personal account. This helps save fees and provide other benefits as well which include
overdraft facility, low interest rates on loans, line of credit facility, early termination fees, minimum account balance requirements etc. That said, it is advisable to do your research and do all check ins to ensure you are getting the best possible deal from the bank.
Bottom Line
Having a business bank account is a sure shot way to make professional transactions easier for you, saves the hassel for your accountants, accounts department, book keepers and others in the firm. It undoubtedly saves a lot of time in taking out relevant bank statements which has your business-related transactions. In the long-run, a separate account saves a lot of operational expenses and administration fees. That said, only knowing these features would not help the business but one must fully understand the compliance related issues which might crop up if we don’t have a separate account and all the associate costs.
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- Source: https://www.finextra.com/blogposting/25559/how-a-business-bank-account-can-help-your-small-business-in-2024?utm_medium=rssfinextra&utm_source=finextrablogs
