Money Matters: 5 Reasons to open a business bank account
When building up your business, it can be easy to get caught in the whirlwind of administration and start charging business expenses to your own personal account. Before long it can feel like too much effort to set up a business account when you have already grown accustomed to operating with your own account. However, there are many benefits to owning a business bank account that you may be missing out on!
Here are 5 reasons to open a business bank account:
Reconciling and accounting
Figuring out the tax and VAT system of a business can be tricky. It is made even harder when personal expenses are thrown in the mix too! Having a separate bank account, for this reason, may seem obvious, but the benefits are immense. Not only will your accountant be thanking you, but it also makes reconciling your accounts even easier, and allows you to view your business’s financial health much clearer. This links perfectly with our next reason, which is:
Specialist saving pots
Certain bank accounts allow for the setup of “pots” within your account. You can move funds into specific “pots” and label them. The utilisation of these will vary from person to person, but a good example would be to have pots for your VAT return, marketing allowance, the development of an emergency fund, or slowly preparing for big expenses. However, not all businesses offer this option, with Starling Bank and Monzo, being the most popular banks to have these capabilities.
With some accounts, there are additional functionalities added to these pots, including the round-up feature (where every purchase is rounded up with the extra being moved to a separate post), specific saving pots with a higher interest rate, the ability to lock pots, and more.
Whether it is only getting started, or trying to develop a new product, cash injection into your business can sometimes be all you need to get going. According to Barclays, having a business account will mean lenders are keener to offer you the loan you need, with some lenders disregarding any applications that do not have a business account.
Credit Card Payments and access to a broader range of customers
Setting up a merchant account* will allow you to take payments from customers using credit cards. More information about taking card payments can be found here. Depending on your customer base and product, accepting card payments, and specifically, credit card payments will allow a broader range of audiences to consume your product. This gives you a perfect opportunity to continue to grow. There are different rates, with banks offering a range of perks, so shop around and find what fits you best!
Last but not least, the financial reputation of your business will affect your ability to purchase in the future. However, having a separate bank account from your own means this will not affect your own personal credit. Once again, Barclays also state that having a business bank account will create a credit history under your business name, increasing the likelihood of your business loan being approved!
At Joanne Manville Virtual Assistance, we have set up our business account with Starling Bank, and have found it has totally changed things for the better! If you switch to them too using this link they will plant a tree!!
I hope you found this advice useful! If you are eager to learn more, you can read about Barclay’s own reasons for having a business bank account here, and Money Super Market’s comparison of business bank accounts options here.
*An important thing to note is that a ‘merchant account’, although similar, is different from a business account. ‘Merchant’ Accounts are specifically used to accept payments from customers, whereas Business Accounts refer to any account used for commercial transactions. Most banks will refer to ‘Business Accounts’ but these include the ability to be paid by customers.