It might feel like opening up a bank account for your business will mean more admin work and lost time. But for small business owners, a separate business bank account is a key step in the journey.
Using a personal rather than a business account can create confusion at tax time, leading to time being spent separating out your business transactions. Here are a few examples of how having a business account rather than a personal account for your business can help.
1. Cleaner accounting
If you separate your personal and business accounts it’s easier to get a clear snapshot of your finances. This is not only true for day-to-day transactions but also when you’re with your accountant working out your overall financial position. Drawing a clear line between the two separates your personal money from funds that would go towards running your business. Any fees charged to a business account are regarded as a business expense and are tax deductible.
Other advantages when it comes to accounting are:
- Easier to manage cash flow as you have an accurate idea of business expenses
- Easier to complete business activity statement reporting.
2. Maximise tax deductions
It follows that having a clearer picture of your business’ finances means it will be easier when it comes time to do your taxes. If you don’t, you could spend hours going through bank statements trying to find each transaction. Not only is this frustrating and not a great use of your time, it means you may also miss items in your statements and ultimately lose out on deductions.
3. More professional
Having a business account from which you make payments, as well as lodge payments into, will help your business appear more professional and established to your suppliers and customers. It’s also an opportunity to get your business name out there. You want your business to be taken seriously, so treating it seriously is an important step.
4. Link to other accounts
If you have a business account you can link other accounts like a business credit card or a payment device, making managing all your transactions smoother.
Your business account can also be seen alongside your personal account in NetBank and on the CommBank App so you won’t need multiple logins and you'll be able to see everything together in one place.
5. You may have to get finance
As your business grows you may find you have to open a business account in order to get finance and further expand. If this is the case, separating your personal and business accounts now could save you a lot of work having to do it later on and help you to easily demonstrate to the lender your business’ full financial records.