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The Benefits of a Business Bank Account

Last editedJan 20222 min read

Business bank accounts are mandatory for people trading as limited companies. Sole traders can choose either to have a business bank account or to use their personal bank account. If you’re asking yourself “What are the benefits of having a business bank account?” here is what you need to know.

You can use it for business

Some personal bank accounts prohibit holders from using them for business purposes. This does vary from bank to bank. Some are, currently, fine with it. You should, however, be aware that even banks that allow personal accounts to be used for business may change their policy at a later date. 

If that happens, you may be left scrambling to open a business bank account. This is inconvenient enough at the best of times. Right now, banks are still largely operating under COVID-19 restrictions. This means that processes such as opening an account can take even longer.

It keeps everything clear-cut

For many smaller businesses, the single, biggest benefit of a business bank account is that it clearly separates your business transactions from your personal transactions. Probably the most obvious benefit of this is that it makes it easier to prepare your tax returns. As a corollary to this, if HMRC does decide to audit your business, they will only see your business transactions, not your personal ones.

This, however, is not the only benefit of keeping your business transactions separate from your personal ones. It makes life simpler in all kinds of ways. For example, if you decide that you want to use accounting software (which is highly advisable), you can usually link it to your bank account. Keeping your business transactions separate from your personal ones will make reconciliation much easier.

Similarly, you may want to use software to help you with your business budgeting and financial forecasts. Even if you don’t, having all your business transactions in one place can make this exercise a lot easier.

You’re ready to scale up

Right now, you might not have had any thoughts about becoming a limited company, but who knows what the future will bring? Having a business bank account already in place is one fewer item on your to-do list if you decide to make that change. Used in the right way, it can also make you a more attractive candidate for financing.

The key point to note here is that business bank accounts can be used to help you build up a credit rating for your business. For example, showing you use your regular business bank account responsibly can help you to qualify for a business credit card. Using your business credit card astutely can do a lot to build your credit rating.

On a similar note, if you link any payment services you use (for example GoCardless) to your business bank account, then you avoid the need to change them later. Likewise, if you have payments set to come out of your business account (for example direct debits you pay), then you don’t need to update your suppliers.

You get extra functionality

Business bank accounts often provide additional, business-specific, functions. For example, they might highlight what money is owed to you and what money you owe to other people.  Business bank accounts do tend to charge fees but these fees often get you access to valuable services such as account managers who can provide business advice.

It looks more professional

Presentation matters in business (as in life as a whole). At the end of the day, business is essentially about you persuading people to give you their money. You need to give them a reason to do this and avoid giving them a reason not to do it. 

Having a proper business bank account signals that you are a legitimate business with everything that implies. This is a strong trust signal.

We can help

If you’re interested in finding out more about the benefits of business bank accounts, then get in touch with our financial experts. Find out how GoCardless can help you with ad hoc payments or recurring payments.

Over 70,000 businesses use GoCardless to get paid on time. Learn more about how you can improve payment processing at your business today.

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