Starting a business is exciting. However, managing the finances efficiently is crucial for long-term success. For startups, a business account can be a game-changer. Not only does it help streamline financial management and keep personal and business expenses separate, but it also enhances credibility and provides access to essential banking services.
What is a Business Bank Account?
A business bank account is used exclusively for business transactions and payments. Business bank accounts are similar to personal accounts, but they often come with additional services and features that can help with running a business
What Are the Benefits of a Business Bank Account?
A business account can provide a startup with various benefits. Some of these benefits include building credit, providing legal protection, making tax preparations easier, and more.
What is a Business Bank Account Used for?
A business bank account is used only for business transactions and payments rather than personal finances. It can be opened in the name of the business, allowing payments to be made and received using the business’s name.
10 Reasons Your Startup Needs A Business ABank ccount
Having a business bank account can do a lot more for your business than keeping your business cash in a safe place. Here are ten reasons why every startup business should have a business bank account:
1. Enhances the Credibility of Your Business
A business bank account supports your branding and your business name. It adds weight to your marketing, invoices, and purchase transactions. It could appear as though you are hiding something if you ask a client or customer to deposit money into your personal account. Asking them to make the payment into your business account will increase the validity of your company and promote your credibility.
2. Keep Personal and Business Finances Separate
No more trying to remember if purchases or income were for business or personal activities. You can easily know the difference between transactions you make for personal use and those you do for business with a business bank account.
3. Loan and Credit Applications
If you want to apply for a business loan, credit card, lease, or other credit product for your business, it can be difficult to secure the funds you need if you don’t have a business bank account. Some lenders will only deposit loaned funds into a dedicated business bank account.
4. Certain Banks Require It
While most banks will ignore small business transactions for activities such as freelance design work, or income for part-time work, they are unlikely to ignore transactions connected to cash-heavy businesses. In such cases, the bank may move to close your personal bank account and tell you that you must open a business account instead.
5. Facilitates Organised Bookkeeping
A business bank account immediately separates your business income and expenditures from your income and outgoings. Although this means you will need to keep an eye on two sets of statements, and card transactions it will be a bonus for your weekly or monthly bookkeeping, and it will save you a lot of time and effort.
6. Provides Financial Stability
A business bank account can help you to better plan your startup business’s cash flow. The account allows you to control your personal budget and ensure you meet your business obligations without running the risk of overdrawing your personal account or failing to meet important business payments.
7. Transaction Limits Tailored for Businesses
Most personal bank accounts have limits on the transactions that the account holder can facilitate, such as daily cash withdrawal limits, and a per transaction limit for debit card purchases. In addition to other features designed especially for businesses, including automated invoice generation or the assistance of a professional financial consultant, business bank accounts typically offer higher withdrawal and transaction limits than personal accounts.
8. Simplifies Tax Returns
Calculating tax or VAT returns, even with the help of an accountant, can be challenging. A business bank account allows you to easily separate your business income and expenditures from your income and outgoings. This will simplify the collection of your financial information.
9. Safeguards Your Business Credit Rating
All UK businesses have a business credit rating, and it works just like your personal credit score. The better your business credit rating is, the better loans, leases and other financial offers your business will receive.
10. Enables Software Synchronisation
Digital accounting systems link spreadsheets, tax information and other financial bookkeeping, such as invoicing and payments to your business bank account. The software will typically track changes in your bank balance and will match them to your sales and purchases ledgers and your cash flow forecast.
What Do I Need to Open a Business Bank Account?
Although business bank accounts will usually have strict eligibility criteria, you may be able to secure a business bank account over the phone, online, through an intermediary, or you may need to make an appointment at a branch. Banks will typically ask for evidence of your revenue and will need to see your annual accounts or previous tax returns.
