Separating your work finances from your personal ones is almost always a good idea. While a business account is a legal requirement for limited companies and partnerships, it’s optional for sole traders, so they will need to decide what’s right for them. Here are the benefits of business bank accounts and why you should give one some serious thought!
10 benefits of a business bank account
It’s easier to organise your finances
You have dedicated business tools
It’s designed for business use
It helps with financial protection for your business
You can save yourself from tax headaches
You can appear more professional
You can build your business credit rating
It can help prepare you to be ready to scale up
You can get access to specialist support
You can get access to networking and business partnerships via your bank
1) Easier to organise your finances
A more organised workflow is probably the main benefit of using a business bank account for work, rather than dumping everything into your personal one. It’s the same difference between having a neat, clean desk and working from a corner of your kitchen table.
Opening a business bank account allows you to separate your personal and business finances. It means being able to track your earnings and expenditure and not having to scroll through pub and supermarket transactions to find invoice payments.
A dedicated business account, together with a good accounting system, enables you to quickly calculate how much you earn and what business expenses you have. Most importantly, it saves you time; and time really is money for a freelancer.
Once you have a clear picture of your work finances, you can regularly transfer your net earnings into your personal account and use the money for everything that’s not business-related, from bills to groceries to cinema tickets.
2) Dedicated business tools
Generally speaking, a business account and a personal account are pretty similar. However, the best business accounts offer additional features built around the needs of small businesses and self-employed professionals.
For example, they sometimes come with an accounting or invoicing service or allow you to integrate your existing software, such as Xero. This allows you to streamline your business finances, saving you time and making it easier to track which clients you should chase for payment. Other useful features include invoicing tools, spending categorization and payment processing to manage expenses and help you stay on track.
If your business involves international trade or overseas clients, having a business bank account can simplify cross-border transactions. It may offer features such as international wire transfers, currency exchange services and tools to facilitate global payments. This makes it easier to receive payments in different currencies, handle international supplier payments and expand your business on a global scale.
3) Designed for business use
Another (perhaps obvious) advantage of a business bank account is that it is designed specifically for that use. In fact, some personal account providers will not allow you to use your account for business use within the terms of the account. With a business account, you know you’re in the right place!
Don’t worry if this all sounds overwhelming to you. “Business account” sounds official and grown-up, and it can feel weird if it’s just you managing your business from a tiny desk in the corner of your living room. And indeed, some of them are pretty complex products meant for big businesses.
But there’s also a whole range of business current accounts specifically meant for sole traders and very small businesses. Some are digital-only, can be opened very quickly without too much hassle or administration and are also cheap.
4) Financial protection for your business
Another benefit of keeping your business finances separate is that you establish a legal distinction between yourself and your business. This separation helps protect your personal assets in case of business-related liabilities, such as lawsuits or debt.
It provides a layer of financial protection and ensures that your personal funds remain shielded from potential business risks. It also means you are less likely to make mistakes when you aren’t mixing your personal and business finances!
5) Save yourself from tax headaches
If you are a sole trader or self-employed person, having a dedicated business account will be a huge relief when it comes to the end of the financial year. It massively simplifies tax preparation when you have separate records of business income and expenses. Everything is easier to calculate, and you can report taxable income to HMRC accurately! It saves you heaps of time during tax season, and it reduces the chance of errors or discrepancies.
6) Appear more professional
If you ask your customers to send money to a random personal bank account, they may feel reluctant or unsure about who they are dealing with.
Having a dedicated business account for your transactions enhances your professional image. Clients and customers perceive you as more credible and trustworthy as you’re operating with an account that matches your credentials. It adds legitimacy to your brand and helps people feel at ease when working with you.
7) Build your business credit rating
As well as your personal credit score, your business will also have a credit rating, and it’s your job to keep this high! Having a dedicated business account can help you demonstrate responsible financial management, repayment of loans or credit and positive banking relationships.
Having a good credit score improves your eligibility for business financing, such as business loans, lines of credit or business credit cards. Lenders often require a dedicated business account to assess your business’s financial health and repayment capacity, making it easier for you to secure the funding you need to expand or invest in your business.
You should also keep in mind that there are specific credit-building accounts for your business if you currently have a low credit score.
8) Be ready to scale up
Time moves pretty fast when you’re running your own business. As you grow, financial management becomes even more important. Having a business account gives you a solid foundation for your finances and cash flow, helping you to scale more easily. Plus, with a dedicated business banking relationship, you can access specialised financial services, tailored business loans and credit solutions that can fuel your expansion plans.
9) Access to specialist support
One great advantage of having a business account is that many providers offer dedicated support and guidance for their customers. The level of support depends on the type of provider and whether they are online-only, but some providers have a responsive customer service department which can come in very handy if anything goes wrong. With some providers, you may also have an account manager to help you with any questions or requirements.
10) Networking and business partnerships
Some banks organise networking events, workshops or forums for their business banking customers. This can be a fantastic opportunity to connect with other business owners, prospective clients and industry experts. As well as being interesting and fun, popping along to these events can help you expand your professional network.
How satisfied are UK business owners with their business banking provider?
Response
% of respondents
Very satisfied
41.25%
Reasonably satisfied
46.50%
Neither satisfied nor dissatisfied
9.50%
Moderately dissatisfied
2.00%
Highly dissatisfied
0.75%
Source: Finder survey by OnePoll of 400 Brits
Are there any drawbacks to a business bank account?
As you can see, there are a whole host of benefits to having a business account. So, what’s the catch? It’s important to keep in mind that business accounts, unlike personal accounts, do usually have associated fees. Whether it’s a joining fee, a monthly fee or transaction fees, you’ll be charged for having a business account with most providers.
You can weigh this against the benefits offered. Also, the terms of some personal accounts don’t allow you to use them for business, so you may find yourself needing a business account after all!
To get started, you can research and compare the specific features, fees and benefits offered to find the best business bank account for your needs.
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Matthew Boyle is a banking and mortgages publisher at Finder. He has a 7-year history of publishing helpful guides to assist consumers in making better decisions. In his spare time, you will find him walking in the Norfolk countryside admiring the local wildlife. See full bio
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Matthew has written 244 Finder guides across topics including:
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