Introduction
In today’s blog, I’m going to dive deep into banking in business and why separating your finances is so incredibly important. This applies to all types of businesses—from sole traders to SMEs to the biggest companies. No one is too big or too small for this rule.
When you start a business, no one hands you a rulebook and says, “Here you go—everything you need to know to get it right!” Wouldn’t we all love that? How many of you reading this are thinking about all the mistakes we made when starting out? I’ll talk more about those in future blogs, but for now, let’s focus on what we need to do when it comes to banking.
When you’re just starting out, opening a separate bank account might not be on your mind. You might ask yourself, “Why bother? My income will be minimal,” or, “Does it really matter if it’s all in one account?” The answer is yes, and here’s why:
- Clarity: You need to be able to see all your incomings and outgoings clearly. If everything’s mixed in with your water bill and your Morrisons shop, it’ll be a mess. Not separating business and personal expenses will cost you time (or money, if you’re paying an accountant) to sort through it all.
- Missed Deductions: You might miss expenses you could have claimed back or lose out on claiming certain charges because they’re mixed with personal transactions.
- Privacy: Let’s be real—you don’t want your accountant looking through all your personal spending, do you? And trust me, they don’t want to know that you popped into Ann Summers last Saturday either! Keeping things separate makes it so much easier—an odd mistake here or there is fine, but a year’s worth of mixed transactions? No, thank you.
- Business Health: To have a clear understanding of how your business is doing, you need a clear view of its finances. A dedicated business account gives you that neat, easy-to-track overview of your cash flow.
Conclusion
So, in conclusion, opening a separate bank account for your business is one of the best moves you can make. It’ll save you time, energy, and money—and your accountant will be a happy bunny too.
