Why You Shouldn’t Use Your Personal Account For Business?
Many small business owners often make the mistake of using their accounts to pay for business-related expenses. Even if it seems like a good decision at the start, this isn’t advisable. Instead of using your account, you, as a small business owner, should open a business account. This will be very useful when your business starts growing. It will stabilize your business’s finances and build its credibility. In this article, we will give you reasons as to why you should consider a business account over using your personal account. But before we dive into that, let’s take a look at what a business account is.
A business bank account is an account that is opened for commercial use. It helps businesses manage their cash flow, make payments, and track their financial activity. Business accounts are tailor-made for businesses.
The Advantages of a Business Account:
When you open a business account with a reliable financial institution, you get several benefits. The following are reasons why you should have a dedicated business account:
Easy to track business finances:
When your business and personal finances are separated, it is easier to track and manage your business finances. When you separate the two, you can make better decisions based on your company’s financial conditions. It also helps you during the tax season and gives you a clear picture of the company’s finances.
Streamlined Expense Management:
Modern financial institutions provide business account holders with expense management tools that simplify the expense tracking process. They provide features such as detailed reports, transaction categorization, and automatic record-keeping. With these tools, you will be able to stay on top of your business expenses without having to sift personal expenditures.
Building business credit:
Financial institutions offer many financial tools and services, such as a business credit card and a line of credit. With this, you can build a separate credit history for your business. This will be different from your own credit history. This business credit history will be very useful in the future when you want to apply for a business loan.
Tax Efficiency:
As discussed earlier, having a business account is of great help during tax season. By maintaining different accounts, you will be able to get a better idea of the deductions for which you are eligible. This avoids the chances of paying more taxes than required. In addition to this, banks also provide tools and services to help businesses prepare taxes, and therefore, it is easier for you to prepare the taxes.
Access to Tailored Business Services:
Business accounts are designed to make businesses grow. From managing payroll to currency operations, these features assist in daily operations. When you operate a business account in one of these financial institutions, you get to enjoy benefits that you cannot get on a personal account.
Disadvantages of Using Personal Accounts for Business Transactions:
The following are key reasons why you shouldn’t use your account for business transactions.
Mixing Personal and Business Finances:
When you use your personal account for both business and personal transactions, it isn’t easy to track your business’s finances. Mixing the two could lead to confusion, making it harder for you to track your business’s income, expenses, and profits. This also leads to mistakes when you are filing taxes.
Complex Auditing Process:
If your business is ever subjected to a financial audit, having all of your transactions jumbled in one account can complicate the process. You will have to manually separate the two during an audit, increasing the chances of misclassification and errors. With a business account, the auditing process becomes smoother, as all of the business-related transactions are clearly documented and attributed to the business.
Undermines Professional image:
Using your personal account for business-related transactions can harm your professional image. When a vendor, client, or partner sends or receives a payment from a personal account, it sends a wrong message about your company’s professionalism. Having a business account projects a more reliable image and builds trust.
Opening a business account with a good financial institution ensures that your finances are in order. It also builds the credibility of your business. Business accounts are specially made for businesses, so the opening one will help your business grow. In the long run, keeping personal and business transactions separate is essential for maintaining a well-organized, professional, and successful business.
