When you first set up a business, dealing with the financial side of things is often the biggest challenge. Setting up your own separate business bank account is one of the very first things you should do. Unfortunately, a lot of novice business owners skip this step because they don’t understand why it’s important. Even those that do understand the importance don’t necessarily know how to find the best accounts and how to manage them properly to get the most out of the services on offer. Here’s everything you need to know about setting up your first business bank account.
Why Is It Important To Have A Business Bank Account?
Separating personal and business finances
Mixing your personal and business finances can be a really bad idea. It’s not just that you can get into legal trouble for doing so; it also makes the accounting side of running your business more complicated and reduces your ability to claim certain tax deductions. It also means that if there is an error on one account, it could affect all of your finances. Examples might include accidentally withdrawing money that is set aside for the business or having your payments rejected because there wasn’t enough in your account after you paid yourself.
Another reason why it’s important to have a separate bank account is security. If your personal details get into the wrong hands, fraudsters could potentially wipe out both accounts and leave you with no way to recover any losses.
Once you start using personal money to fund the business, it’s the start of a very slippery slope that leads to a lot of financial problems. Equally, if you spend money from the business on personal items, this causes issues too. So, keeping them separate is key.
Make tax returns easier
Tax returns are never easy, but keeping your business and personal finances separate makes filing them a lot easier. You need to give a clear record of all of your business spending so you can claim your expenses. But if all of those transactions are tied in with your personal account, you have to spend ages sorting through everything. Any mistakes could lead to fraudulent expenses claims, which causes a lot of unnecessary trouble for your business.
Look more professional
When you start a business, it’s important to look professional. This includes everything from getting your accounts in order, to having a business credit card and even the paper that you write on. Showing off all of these things can make people take you more seriously. If you are asking clients to make payments into a personal account, this can make you look very amateurish.
Build a credit rating for the business
If you want to take out a loan for your business in the future, it’s important that credit reporting agencies know who you are and what kind of risk you pose to them. So, you need a good credit score for the business just like you need a good personal credit score. Having a business bank account and managing all of your finances through that allows you to start building credit for the business. It also means that your personal credit mistakes will not have as much impact on the business.
Tips For Getting Your First Business Bank Account
Now that you understand the importance of a business account, you can start comparing the different options. Follow these tips to help you get the most out of your new business account.
Get your paperwork in order first
Before you can apply for a business account, you will need to provide certain information, like your company registration number and details about who is running the business etc. Look into where to find your company registration number and gather all documents about the business structure etc before you approach any banks. This will speed the process along so you can get your new account up and running straight away.
Check interest rates and fees
Even if you’re not planning on taking out a loan, it’s still worth comparing the interest rates and fees that different banks charge. You will be surprised how many different options there are even if you are just looking for basic business accounts and credit cards etc. This will help you to find the best one for your business needs. A lot of business accounts will charge monthly fees for their services and, although they don’t seem like much, it’s an added business expense you need to consider. So, shop around to find the best interest rates and fees before opening your account.
Look for introductory offers
Banks will often offer good introductory offers to attract new customers. So, it’s worth checking what they have on offer before you commit to opening an account with them. If you can get a period of reduced fees, for example, this will be helpful in the early stages of your business when you are trying to keep costs down. Just make sure to check what the terms of the account are once the introductory period is up so you don’t get caught out later on.
Check additional services
Some banks offer additional services like an account manager. This can be great if you need a little help with your business finances for any reason. If you want to get the most out of your account, though, it’s worth checking whether these services are included in the fees or whether they cost extra. And make sure that all of the services offered will actually benefit your business before opening an account with them.
Look at what kinds of business loans they offer too. Even if you’re not planning on borrowing money, it will still be useful for your business to have a bank account that offers business loans. Some banks will also offer business insurance packages, and it makes life easier if you can do everything through one institution.
Look for reviews
It’s worth doing a little research before you commit to opening an account with any bank. Look at online reviews and chat to small business owners in your field or industry to find out about their experiences. A quick search on the internet should bring up lots of different opinions and you can use these reviews to gauge whether a bank is good or not.
Looking at the fees they charge and the services they offer is important, but find reviews about customer service too. If there is a problem with your finances or you want some advice, you need a bank that will communicate well with you.
Don’t be afraid to switch accounts
In the future, you might decide that you are not happy with the services offered by your current bank, or perhaps another bank has a better offer. You can always switch accounts if there is something wrong with your existing one. It’s much easier now than it used to be and usually won’t take much time or effort on your part as well as being free.
Banks are always changing their terms and coming out with new introductory offers. In a lot of cases, switching regularly allows you to take advantage of these offers and ensure that you are always getting the best possible deal. You won’t get any bonuses for loyalty, so don’t be afraid to switch when it benefits you.
Opening a business account is the first thing you need to do before you get your business off the ground. Make sure that you take the time and shop around to get the best deals, and always read the agreement in full before you open your account.