How to avoid mixing personal and business finances

Around 25% of small business owners use their personal bank account to administer company finances rather than opening a separate account, a survey from Citizens Bank has found.

While having a single account to administer both your business and personal finances might seem like a simple solution when you’re first starting out, it can also be a potential recipe for disaster.

Failing to keep track of your business finances could not only result in an incomplete picture of how much money your business is really spending, it might well cost you money in its own right. For instance, if you fail to keep accurate records and end up quoting an invalid amount on your tax return, then you could be in line for a significant fine from HMRC and/or you could inadvertently pay too much tax.

The simplest way to stay on top of your transactions is to utilise advanced accounting software, such as FreeAgent or Xero. You can sync them to your bank account and categorise each type of payment (personal, business, expense etc.) separately, keeping everything accurate by making sure that payments are automatically put in the right places.

It is always a good idea to have separate bank accounts for business and personal use. Setting up a business account with your bank should be a straightforward process, and many offer incentives such as 12-months of free banking to help get you started.

If you want more expert accounting advice for small business owners, call on the friendly team at 3 Wise Bears today.