A business bank account is essential in order to keep your business and personal transactions separate. This gives you visibility of your finances allowing you to maintain a clear distinction between personal and business transactions.
Keeping personal and business transactions separate helps to ensure accuracy in your bookkeeping so that tax returns are submitted without any errors. It’s also much easier to track all your expenses if they’re all in one place.
If you’re a sole trader it’s not a legal requirement to have a business bank account but we strongly advise you to do so. A limited company must keep all personal and business transactions separately by law.
Having a business bank account shows your professionalism and conveys that you are a genuine and legitimate business entity to your clients.
What’s the best bank account for my business?
As a professional bookkeeper we come across various different bank accounts. We find the best to use are the challenger banks who operate online only. The technology behind their apps is much more advanced than the larger more corporate banks. Banks such as Starling, Monzo and Mettle feature saving spaces where you can put money to one side for things like VAT and Tax bills, without needing to apply for a separate savings account. It’s a really clever way of saving.
If you receive cash payments you’ll also need to consider how easy it is to make a cash deposit into the account. If you have a lot of cash coming into the business, a physical branch may suit you best. I know it’s not really common any more but for payments via cheque, some banks have a processing fee, so be sure to check out what the implications are if you expect that depositing cheques will be a requirement.
It’s important to research various banks to find out what suits your requirements best. If you require an overdraft for example this may come with fees and some banks will be higher than others. If it’s something you use a lot then it’s worth considering a cheaper option. Also watch out because some banks charge you for banking with them. There’s plenty of banks around which don’t do this, so it’s definitely worth looking into all your options first.
Business credit cards
Having a business credit card can have its advantages. If you’re a Limited Company you’re more likely to be accepted for a business credit card. You’ll find that a business credit card will come with a higher credit limit than a personal credit card as a business tends to have more transactions coming in and out than a personal account would. Having a business credit card will also help to improve your credit rating which will come in handy if you ever need to borrow money.
Most credit card companies offer extra cards at no extra cost which can be issued to business partners or employees for their expenses.
Due to the higher spend value you may also get great benefits such as rewards and offers when using your company credit card.
Some credit card providers will charge you for the privilege of having a business credit card, so again make sure you do your research before deciding on the best card for you. It can be very easy to overspend when using a credit card and the interest rates can be quite high if the balance is not paid at the end of each month. Make sure you only use a credit card if you know you can pay the balance.
If used correctly a credit card can help to improve cash flow in your business and help with your accounting process.
I hope this blog has clarified the reasons behind using business accounts and business credit cards. If you have any questions or just need a little bit of advice when choosing your next bank account then please do get in touch.