Your personal expenses and business expenses are two completely different things and should be treated as such as well. Many small businesses make the mistake of mingling these two as research has shown that more 70% of small businesses finance their business with personal funds.
This can create many problems for you and your business in the long run. This is why you should always have a separate business bank account and a separate personal account and here are a few reasons why.
Difficulty in making accurate calculations
Honestly, this can be your biggest nightmare as it might lead you to have problems with the HMRC. To file your tax returns you will have to show them the amount of money your business has made. For this, you can deduct some expenses such as travel costs to calculate the profit.
However, if your personal expenses and costs are mixed with your business then you will face a big problem while calculating your tax returns. A separate bank account will make all of this easier for you.
Makes you look unprofessional
Your clients will only take you seriously if you take your work seriously as well. If they want to transfer payment or write you a check and you give them details of a personal account then it might give the impression that you are unprofessional and not at all serious about your business.
Some clients don’t even prefer sending payments to an account that is not a business one. This is why you must create a separate business account.
If you are mixing the two then there are high chances you will make many mistakes in your books. This is because you will have to make so many entries and transactions that it may be easy to overlook some. This will waste your time and so much effort when you could have simply avoided all this by opening a separate business bank account!
It is mandatory for limited companies
Since your business is legally a separate entity the HMRC requires you to have a separate business account as well. It is mandatory for all limited companies to have a separate business bank account and if you don’t then you might get in a lot of trouble with the relevant authorities.
Business bank accounts have more options
Personal bank accounts have limited features needed daily. However, they are not ideal for a business to have as you will need cash and cheque handling and an overdraft facility as well.
Another plus point is that you can apply for a credit card, borrow money from the bank, and take card payments as well if you have a business bank account!
Regardless if it is mandatory or not, you should always have a separate business bank account. It will make things easier for you and reduce the time it takes for you to do things. A separate business bank account is always recommended over mixing your personal account with the business.
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