Why should personal accounts and business accounts be separated?
Jan 21, 2022
Did you know that having separate bank accounts for your business money and personal money is essential?
While it is convenient to keep them in one account, it is a crucial requirement for a business to separate them. It's important that your business money and your personal money are kept completely separate. The reasons for this are many, however, the main ones are:
While it is convenient to keep them in one account, it is a crucial requirement for a business to separate them. It's important that your business money and your personal money are kept completely separate. The reasons for this are many, however, the main ones are:
- Easy bookkeeping. You only need to classify and track your business expenses for your tax return.
- Mixing up personal expenses will mean you spend more time doing the bookkeeping for your business for no result.
- You can see exactly what cash flow the business has
In Northwest Accountancy, we use the Profit First methodology of managing the cash flow for our business. This means that we track our money each week, and divvy it out to the bank accounts for the purpose that is required, meaning we always have money for what we need. We are certified to provide advice, guidance and support to all businesses, whether just starting using Profit First, or those well into their journey, using the Profit First philosophies.
When recommending banks, we look at:
- Fees! Try not to pay bank fees where possible
- Ease of using internet banking, loading up payments, and bank feeds
- Customer service in your area
We also recommend using 2 banks if you are a "see money, spend money" person, to keep your tax and profits separate to your everyday banking, to reduce the amount of times you see the bank balance and the wish to spend it all.
Your business may need more than the recommended bank accounts, depending on your goals.
Handling a business is definitely not a walk in the park, therefore, organizing your funds and choosing the right bank is necessary for the long run. By doing so, you'll be a step closer to your goal of having a successful business.
When recommending banks, we look at:
- Fees! Try not to pay bank fees where possible
- Ease of using internet banking, loading up payments, and bank feeds
- Customer service in your area
We also recommend using 2 banks if you are a "see money, spend money" person, to keep your tax and profits separate to your everyday banking, to reduce the amount of times you see the bank balance and the wish to spend it all.
Your business may need more than the recommended bank accounts, depending on your goals.
Handling a business is definitely not a walk in the park, therefore, organizing your funds and choosing the right bank is necessary for the long run. By doing so, you'll be a step closer to your goal of having a successful business.
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