You may know by now that one of the very first things I will ask you when we sit down together to chat about your business is “do you have a business bank account?”
Setting up a separate bank account for your business is super important. In fact, it’s actually a requirement in some circumstances, depending on your business structure. It’s also one of the first steps I recommend in setting up your financial foundations and organising your business finances.
When do you need a business bank account?
If you’re a sole trader then you don’t actually have to have a separate business bank account, BUT it is absolutely best practice to get one, and we’ll go into why a bit further below.
If you’re operating as a partnership, a company or a trust then it’s actually a requirement (in Australia at least) to have a separate bank account for tax purposes.
Your operating structure is something that you should chat about with your accountant or tax advisor if you haven’t already :-).
What are the benefits of a business bank account?
A business bank account is going to be your best friend. In fact, if you decide to look into Profit First for your business, then you’ll end up with multiple best friends. That’s how much your bank accounts matter.
It’s easier to track your business income and expenses
With separate bank accounts for your business it means that all your deposits for income and payments for expenses are contained within their nominated accounts. You will then be able to see at a glance how much money came into your business and how much you have to spend.
You’re better able to control your business income and expenses
You may have heard the saying “What gets measured gets managed”. Being able to track income and expenses for your business means that you’re in a much better position to be able to control what is happening with your money, and thus manage cash flow much more effectively.
Seeing as cash flow is the lifeblood of your business, managing it should be a super high priority when it comes to operating your business.
You can keep your business finances separate from your personal finances.
Having both business and personal finances mixed together is a recipe for disaster. Having them all mixed together means you never have a clear idea on what you’re spending in either universe.
It’s easier to get the information you need for your accountant or for your tax and reporting requirements
When you have all your financial information going through dedicated accounts, then you don’t need to spend time sifting through what you do and don’t need, come tax time (which is a reporting and compliance nightmare!). Business is business and personal is personal.
You take your business seriously
I reckon this one is pretty important. Taking the time to set up dedicated accounts for your business means that you take your business seriously and it warrants this special attention. Giving your business love means it’s more likely to love you back in a positive way.
Ready to get the financial foundations sorted for your business?
Nail step #1 and tick that bank account off your list. Click here to grab a list of Australian low or no cost business bank accounts for you to check out.