Fred Hoad at Sallows Associates explains why as a small business or sole trader you should have a business bank account for your business
Maintaining a separate bank account for your business is something that some people shy away from, citing the cost of bank charges. However, most banks will offer the first 12 to18 months of an account free and the monthly costs thereafter are likely to be between £5 and £10 per month
As business has developed and as we move to more and more business being dealt with digitally, having a business bank account will become even more necessary. With analytical software by banks becoming more sophisticated your bank may insist that you maintain a separate business account anyway.
There are a number of advantages to maintaining a separate business bank account as follows:-
A business bank account keeps a clear and straightforward record of business incomings and outgoings making an immediate overview of the state of the business much easier to access and its trajectory much easier to track.
It becomes possible to see, at a glance, the balance between business income and outgoings and whether this balance is healthy.
You are less likely to confuse your own money with that of the business.
If you use your personal account for your business it is the right of the Inland Revenue to request access to it whenever they see this as necessary.
This could potentially lead to, at best, having to explain all financial activity and worst, the discovery of undeclared income.
Business accounts cost money but offer considerable savings in time in addition to a realistic view of how the business is doing at any given moment.