According to the Current Account Switch Service (CASS) and Small Business research, 20% of small business owners are still banking through their accounts.
Though banking with your current personal account may appear more convenient, you may be placing yourself at a disadvantage. We’ll go over some of the advantages of having a business bank account.
Functionality is limited.
While your account may be less expensive, you won’t be able to use several important business capabilities designed to help small businesses. You won’t be able to cash cheques written to your account, for example, because they must be in your company’s name. Using separate accounts will also make it easier to keep track of your expenses and file your taxes.
You and your company will be better protected.
Having a business bank account protects your identity because the account is in your company’s name. You’ll need more security because the number of transactions you conduct will almost certainly be higher than on your account. Banks usually have information and security systems to warn business banking customers about potential frauds.
It also protects you since if one of your accounts is hacked, the other is more likely to be unaffected.
Having a more positive relationship with your bank
Having a business account with your bank will help you develop a stronger relationship with them. A business banking manager may be included in your account. They can also guide how to improve business growth and efficiency. You may need to seek additional financial support from them as your firm grows, so it’s good to get to know them early on.
Even if you’re a sole trader, your bank may refuse to let you use your account for commercial activities. If your bank discovers that you’re using your account for business purposes, they may shut your account and terminate any past relationships.
Establish a credit rating for your company.
Having a specialized business account is a means to develop a credit rating for your company when applying for credit. This can increase your chances of getting a loan if you need one. Just make sure you keep track of your company account.
You were anticipating this one. Free accounting software or a card reader are examples of freebies and bonuses offered by business bank accounts that could benefit your business. Some banks also provide a free banking period of 12 or 18 months.
I’m not sure which account type I use.
Two percent of study respondents were unsure what type of account they had, which is concerning. If you’re unsure, check your online banking; it should inform you, even if it’s just based on the account name. If that doesn’t work, get in touch with your bank.
It’s worth noting that having your personal and corporate accounts with the same bank can have advantages. It contributes to a couple of the factors indicated above, such as developing a stronger relationship, which can help with future decisions such as taking out a loan. If you have two accounts with one provider, you may be eligible for discounts and other benefits — after all, you’re depositing more money with them.
The Current Account Switch Service makes it simple for customers unhappy with their current account, whether it is business or personal. All you have to do is give yourself at least seven working days. You can even switch on a date that is convenient for you. Your new bank will handle the majority of the work. To discuss your circumstances and switch alternatives, contact your new bank first, or visit the Current Account Switch Service for additional information.
“There are many elements to consider when beginning and running a small business, from staff to products and customer service,” stated Jo Ainsley, Senior Service Lines Manager at Pay. The UK. Making sure you’re with the right company and current account provider can help you check off one of the items on your to-do list.
“Many SMEs are still using current personal accounts for business banking, and they may be missing out on important perks and support.” We know that SMEs have been severely damaged in recent years, and as they move into a new time of recovery and expansion, it’s more critical than ever to make sure they’re working with the right business account provider.”