When you are a start-up business, you will be met with a huge choice of business banking options. One of your requirements is to ensure that you choose a business banking provider that works for you. Depending on your business circumstances, you may already be using your personal bank account. The trick is to ensure that if you are moving from personal to business banking that you do not get the two accounts confused and mixed up.
The business banking world is often met with a slight raised eyebrow. Charges and fees that are added to certain services can leave most entrepreneurs a little disgruntled. Some try and combat these charges and fees by using their personal account. The technological advances in banking have made making and changing transaction easier. Online banking means that you can transfer money online from or into your personal account in seconds. This means you can avoid any potential business banking charges and fees.
The recommended advice here is: Do not do this. It can lead to potential problems for your business in the future!
There are a number of great reasons why you should never mix business with pleasure. Or in this case, your business banking account with your personal account.
Hobby Business
As a certified business, you can deduct business expenses and claim certain taxes back from the Government. If you are using your personal account to deal with transactions, your business may appear a hobby business. This means that you will have to try and convince the Government that you are actually operating as a legitimate business.
Tax Hell
It is time to hand over your annual accounts to the tax office, but you have mixed up business transactions in your personal account. This can only mean bad news. It will be a nightmare to go back and check both your business banking account and your personal account statements. Transaction by transaction, line by line, it will eat into your precious time.
Audit Fails
When you are submitting business information, it is good practice to ensure that you have a clear and concise audit trail. If you have used your personal account, rather than your business account, your audit trail gets harder to record. You should be able to trace all of your incomes and deductions, creating an accurate business statement.
Poor Account Statement
Mixing your business with your personal banking creates a complete mess of your transactions. It is of benefit to you and your business that you keep your transactions as clear as possible. If not, you could be missing out on potential returns on your tax or miss deductions that your business could be entitled to. In addition, your accountant may charge you more money when preparing your tax return. This is because more time is needed to ensure that your records are correct.
Better Business
Trust is something that can be easily broken. You may have built up a relationship with customers and businesses that you deal with since you started. What kinds of messages are you sending out to these people if the receive a cheque from you that is from your personal account?
