If you are running a business, you will be doing yourself (and your accountant!) a favour by having separate business and personal bank accounts.
Large businesses might even have several business accounts. But even if your business is a small one, a home-based business, or a freelance business… you still really do need separate bank accounts.
How you benefit from setting up a business bank account
From financial reasons, through to simply being easier, there are many reasons why having separate bank accounts is a good idea.
1. Look more professional
A separate account, in your business name, makes you look more serious, including helping to establish your business identity.
By choosing to separate your finances, you signal to clients that your business is legit. If you want people to take your business seriously, don’t ask them to pay into your personal account – it’s not a good look.
Having a business bank account will also help improve your business mindset – if you ever doubt yourself or feel that "imposter syndrome" is creeping in, then having your accounts all set up will help cement in your mind that your business is real and valid.
2. Maximize tax deductions
While we all want to do the right thing and pay what tax we owe, no one wants to pay more tax than they need to.
When you're running a business, the bottom line is so very important. Businesses need to maximise profits and minimise costs – well, tax is a cost!
Therefore, one of the biggest benefits of separating business and personal accounts is being able to access all the tax benefits… and there are plenty.
Also, trying to sort through your personal records at tax time is a nightmare. Capture business expenses in your business account to make it easier to claim those deductions.
Enjoy the benefits of maximizing tax deductions, including writing off business expenses, and avoid the hassle of getting things wrong.
3. Simple accounting (less head scratching come tax time!)
Save yourself the stress of trying to figure it all out tax time. Keeping your business accounts separate from your personal accounts really does help at tax time.
If you can easily hand off all your business financial statements to your accountant in an organized way, it also helps reduce inaccuracies (which could save you from being contacted by the tax office for an audit!). This makes it easier to complete a business activity statement reporting also.
If there is a more streamlined process when meeting with your accountant you can keep the costs down. Basically, the quicker we can sort your accounts, the less it costs you!
4. Ensure you receive a salary
If you are running a business, you still need to get into the habit of paying yourself a salary, and keeping your expenses separate.
Too many business owners forget to pay themselves or don’t realise how much (or little) the business is making.
From 'day one', you should be paying yourself a salary, otherwise you cannot get a true picture of whether the business is profitable.
This makes it much easier for you to build up savings, and ensure you also make a profit.
5. Easier to apply for credit
All businesses will at some point probably need to apply for a credit card or a loan. If you want to grow or scale the business, or purchase expensive equipment, having good business credit is vital.
Banks will want to see your business accounts, your incomings/outgoings, and your ability to repay the loan. Imagine the nightmare of tangled statements if this is not all separate from your personal accounts?!
Get your accounts in order today!
Profacc Accountants & Financial Planning can help you manage all your business and personal finances. With a dedicated team of accountants and bookkeepers with extensive local and international experience, we can provide all the expertise you require.
From tax returns to self-managed super funds, from bookkeeping services to financial planning, even business advice and estate or succession planning – name it, we can do it!