The benefits of business bank accounts for small and independent businesses

The benefits of business bank accounts for small and independent businesses

When you first start out as a small business, freelancer or independent trader, it may be tempting to just use your existing bank account as both a personal account and the business account.

But, when it comes down to processing your business payments and handling transactions, the benefits of business bank accounts are clear.

What is a business bank account?

Business accounts are bank accounts used by commercial businesses or sole traders to manage any money that is acquired through their business. They work similarly to personal bank accounts but often include additional services from the account provider that let the holder keep track of things such as: 

  • The cash balance of the account
  • What money is owed to the business
  • What money the business owes to creditors
  • Employee payroll if relevant

When businesses begin to become more established and bring on additional staff or find themselves handling more payments, it’s beneficial to have a separate business bank account to keep these transactions separate and make clear distinctions between what is a business payment and what is personal.

Do you need a business bank account?

Whether you need to set up a business bank account or not depends on the type of business you operate. If you’ve set up as a limited company or partnership then, to ensure you correctly report your taxes, you’ll be required to have a separate business bank account.

But, if you’ve set your business up alone and are registered as a sole trader, you aren’t required to have a separate business bank account. However, it is generally easier to keep clear distinctions between your personal and business transactions and finances, especially when it comes to the end of the tax year.

The benefits of business bank accounts

For independent retailers, tradespeople and other small businesses regularly taking payments from customers or clients, having a business bank account isn’t a necessity but can help you to have much more control over your business finances.

Whether you opt for a simple bank account that acts in a similar way to a personal current account or a more comprehensive account with additional features to handle payroll etc, setting yourself up a business bank account has some helpful advantages.

Simplify your tax returns

With a separate business bank account, when it comes time to complete your tax return, you can clearly see all the income and expenses your business has incurred without having to sift through personal payments and transactions. 

And, if for any reason your business finances are investigated by HRMC, they won’t need to look through your personal finances as all your business’s financial information will be contained in your separate business bank account. 

Don’t break your personal account Ts&Cs

Many personal bank accounts stipulate in their terms and conditions that they can’t be used as a business bank account. While you’re unlikely to get called out for a few payments as a freelancer, if you’re running a retail business or receiving regular direct debit or cash payments from customers into your bank account, you might find yourself breaking the terms and conditions of your account.

Build up a business credit rating

Having a separate business bank account helps you to begin to build up a credit rating for your company just as you have a personal credit rating. This is particularly useful if you are ever in need of a business loan or company credit card. By having a well-managed business bank account, you’ll benefit from a continuously growing credit history.

Business bank accounts make you look more professional 

Whether you’re paying out to contractors and suppliers, or receiving payment from customers and clients, when you provide the details for a dedicated business bank account you automatically come across as more professional and established. 

Business bank accounts considerations

While there are plenty of benefits of business bank accounts, there are a couple of considerations as well. Banks often charge monthly fees for business accounts of around £5 per month. Banks may also charge additional fees for cash deposits and withdrawals and occasionally will charge for making other types of transactions. 

However, a lot of banks offer introductory offers as incentives for business account customers, usually in the form of free banking for a particular length of time when you first open your account. They may also offer incentives such as free or discounted electronic transactions, designated business account advisors or competitive interest rates on the balance of your business’s profits.

Business bank accounts and RSM 2000’s services

For businesses taking regular payments from customers either through online systems or physically in a retail environment, it’s highly beneficial to have a business bank account. As we’ve already mentioned, a business bank account will save you time and admin when it comes time to do your annual tax return, but it’s also beneficial to have a business bank account when updating your payment processing systems. 

While personal bank transfers and other solutions are fine in the short term, when you begin to get more serious about your business and start to handle more frequent transactions, it’s best to have solid payment processing systems in place. 

This is where RSM 2000 comes in, we have over 20 years of experience providing payment processing solutions for small, medium and large scale businesses in a range of industries. 

When you enlist our services, from online payment gateways and Bacs bureau to point of sale card processing and direct debit solutions, and integrate our systems with your business bank account you’ll seamlessly receive funds from customers and clients directly into your bank account.  

One particular benefit of business bank accounts integrated with our RSM 2000 services is having your business or trading name appearing on your customers’ bank statements. Recognising the name of your business on their bank statements reduces the number of transaction cancellations and queries from customers, saving you time and money. 

With your business bank account linked to our services, you can also benefit from: 

  • Paper or Paperless Direct Debit customer sign-ups supported by RSM 2000.
  • A password-protected user portal for secure file upload and download.
  • Unlimited access to reports with ample data for management information and analysis that can be downloaded and then tailored to your business requirements. 

To find out more about how RSM 2000 can help you improve your payment processing and create a tailored solution for your businesses needs using your business bank account, speak to one of our advisors today.

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