What are the differences between a business bank account and a regular current account? Which of these two types of accounts should you get and why?
Today, running a business is not as easy as people may think. Aside from finding ways to cheaply market your business, you’ll also have to sort out your business finance.
Therefore, when you’re launching a startup, you have to first sort out your business’s current account. It’s arguably one of the best ways to get your business finance on the right track.
Entrepreneurs are falling short
A lot of entrepreneurs are falling short when it comes to managing their business finances. This is because some of them are running their businesses on their personal accounts.
It means they are using their personal accounts to manage any financial dealings which can cause a huge headache when it comes to things like expenses and taxes. Check out our article on how to get your account in order and build your business credit.
To stop this number-crunching nightmare further down the line you should get yourself a business account with your bank. If you’re a new business owner and you’re wondering what the difference is between your personal account and a business account, here is a quick breakdown.
Business account and personal account similarities
The two are actually very similar, which means there is even less excuse as to not getting one. As with a personal account, your business account will have cash and cheque handling. A business account also offers a debit card and the option for an overdraft.
Plus, having a business account means you will find it easier in the future to borrow money. Also, it means that you will be able to accept card payments from customers. Even getting a business credit card will be much easier if you have a business account.
Business account and personal account differences
The main differences between the two types of accounts can be easily found with fees. Unlike a personal account, you will be liable for paying a monthly fee to run your business account.
While a lot of businesses are offered a free period when you open the account, this inevitably comes to an end. Typical fees start at around £5 and will also include additional fees for certain transactions and other particulars.
Do I need to have a business bank account?
Technically, you are not required to own a separate account as a business owner. However, it will become a massive hindrance as time goes on if you don’t. Having a bank account for your business means you can clearly see money coming in and money going out.
Also, it means you can manage your business finances with ease. This makes expenses and calculating profit undeniably easier. It also helps to give your business a little more legitimacy when it comes to any financial dealings.
For example, if you’re a personal trainer, people might feel a little uneasy sending money to a personal account instead of a branded, business account. The same goes for any type of business, people are more comfortable sending money to a traceable and professional bank account than a personal one.
How do business accounts help with growth?
If you’re an SME owner or plan to be, having a business account is essential. As soon as you move from a sole trader to a limited company, it is heavily advised to have a business bank account. In terms of future planning, having a business account means you can readily take on a prepaid business account and issue cards to employees.
These are preloaded cards with funds that mean employees at your company can make payments and cover expenses without exceeding budgets. Even though having a business account isn’t a legal requirement to trade, it certainly makes your life a lot easier.
Opening an account also paves the way for future growth and clearer budgeting. However, the choice is yours, so make sure you’ve done your research to make an informed decision when it comes to your business.
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