Why a second bank account will make your finances easier to manage
Here, our tax expert Emily Coltman gives her top tip for the one thing you should change to make running your business finances easier a second bank account.
The new tax year has recently started, so it’s a great time to think about making a new year’s resolution or two that will give your business a boost over the next 12 months.
But before you set off on a mission to boost your sales, revamp your marketing or pivot your company in an entirely new direction, it’s a good idea to take a step back and think about starting with some business basics.
As many as three-quarters of Britain’s self-employed workforce are using personal bank accounts for all business transactions, despite research revealing the negative impact on growth.
In fact, research suggested as many as 15 days of paid work are lost every year as a result of untangling business and personal finances. By combining finances into one account, self-employed workers could be at risk of inaccurate tax and business valuation by HMRC.
Why a second bank makes sense
That’s right youll be much better placed to manage your finances with two different bank accounts rather than just one.
Why’s that? Well, one account is for the day-to-day money that goes in and out of your business. That’s where youll collect money from your customers and pay money to your suppliers.
Make sure this account has a debit card too and use that card, not your personal credit card, to pay for business costs when you’re on the move. Itll make it much easier to keep track of how much you’ve spent on your business if you do it all from the same place.
So when you’re buying a train ticket to go and visit a client pay with your business debit card. If you’re in the post office sending a letter to a supplier – pay with your business debit card.
Emily Coltman is chief accountant to FreeAgent, provider of cloud accounting software for freelancers, micro businesses and accountants. She is passionate about helping the owners of small and growing businesses to escape their ?fear of the numbers? and she translates small business finance and tax into practical common sense speak.
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