You might think that business bank accounts are only for fully fledged companies with multiple members of staff, clients and more complex financial affairs. However, even sole traders could find a business bank account useful so you shouldn’t rule it out.
How do they work?
Business bank accounts work more or less in the same way as personal bank accounts. However, there is usually a fee to pay and transaction charges so it’s best to shop around to see what the best deal for you is.
If you’re going to be making a lot of transactions by cash or cheque, then you will want to look for an account with either a standing charge or no transaction charges. If on the other hand you expect to make your payments electronically, then you might be better off with an account with transaction charges but without the standing charge.
Why should you get one?
There is no legal requirement for you to have a business bank account as a sole trader but it can come in handy for keeping your financial affairs as simple as possible.
Easier to work out cash flow
It’s a lot easier to separate your business and personal life if you have separate bank accounts. With a business bank account you can clearly see your outgoings and your income of your business as a separate entity to your personal finances. This will make it easier for yourself or an accountant to work out how much tax you owe.
Easier to keep track of expenses
Like the above point, when it comes to noting down your expenses, it’s so much easier to see with a dedicated business bank account how much you’ve spent on your business.
If you’re still using your personal account you’re going to spend hours going through it to see which transactions are personal ones like shopping and which are things you’ve bought for your business. A lot of the time you’re going to forget and cause a great deal of confusion. Having a business account will make the process for claiming expenses against tax as stress-free as possible.
Having a dedicated business account for your clients to pay into will look a lot more professional than just a personal bank account. This can go a long way in establishing trust with clients who might be wary of paying into a personal bank account.
Have you thought about getting a business bank account? What do you think the main benefit of one would be? Let us know your thoughts!