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Keeping your business funds and personal finances separated can save a lot of hassle when it comes to managing your money, by reducing confusion at tax time, as well as time spent separating out your business transactions. Here are a few examples of how having a business account rather than a personal account for your business can help.
If you separate your personal and business accounts it's easier to get a clear snapshot of your finances. This is not only true for day-to-day transactions but also when you're with your accountant working out your overall financial position. Drawing a clear line between the two separates your personal money from funds that would go towards running your business.
Other advantages when it comes to accounting are:
Having a clearer picture of your business finances will make doing your taxes easier when the time comes to complete your returns. If you don't separate your business and personal spending, you could spend hours going through bank statements trying to identify each business transaction. Not only is this frustrating and not a great use of your time, it means you may also miss valid business expenses hidden in your personal bank statements and this means you could lose out on possible tax deductions.
Having a business account from which you make payments, as well as lodge payments into, will help your business appear more professional and established to your suppliers and customers. It’s also an opportunity to get your business name out there, and hopefully as a result build trust and awareness of your brand.
As your business grows you may find you have to open a business account in order to get finance and further expand. If this is the case, separating your personal and business accounts now will help you to easily provide any lender with full financial records of your business.
Every business is different and has unique banking needs, discover your options.
This page is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and should not be relied on. This information has been prepared without considering your objectives, financial situation or needs. We recommend you seek independent professional advice and contact Inland Revenue before acting on this information.