Importance of Having a Current Account for SMEs
You certainly don’t want your business and personal finances mixed-up. It might seem convenient to maintain a single bank account, however this could lead to several unanticipated issues. It is advisable to use different banks for business and personal accounts. This is especially useful when it comes to streamlining your tax records.
Selecting a business bank for your firm’s current account will reap dividends in the future. There are numerous reasons for maintaining a schism between your personal account and your business account. Following are some of the reasons for having a small business current account:
Protecting Your Personal Assets
It is imperative to form a limited liability company (LLC) to protect your personal assets from business losses. This creates a clear distinction between the business as a separate entity and the company’s owner. Failure to do this might land you in trouble when your business is sued or on the brink of bankruptcy. You definitely don’t want the authorities coming after your personal assets.
Organised and Accurate Bookkeeping
You don’t want to shuffle through your grocery bills for countless hours just to find your past year’s business records. Failure to provide accurate records can land you in hot water with the tax authorities. Having a separate account will help you in maintaining clean records that you can hand over to your accountant. It’s important to maintain records of all invoices and receipts and should correspond to your chequebook and bank statement entries.
You don’t want to pay your employees using personal cheques or have your clients write a cheque with your name on it. You don’t want to look unprofessional to your clients and contactors. Maintaining a clear division between your personal and business finances will augment your image of professionalism. The written cheques should reflect the fact that you are running a legitimate business.
You should always be prepared for a surprise audit from tax authorities. If you are a small business with large expenses, then minute scrutiny by auditors is inevitable. Having a separate business account is beneficial if you buy office supplies and computer software on a regular basis. This will help you segregate your business and personal expenses.
It is an easy process to open current account online for your business. Maintaining a current account will help your company build up its all-important credit history. This will have a direct impact on your company’s loan eligibility. The current account is available for the following businesses:
- Sole proprietorships
- Partnerships/limited-liability partnerships.
- Private/public limited companies.
- Educational institutes.
- Insurance/mutual funds
- Share and stock brokers.
So don’t wait to reap the benefits of a current account. Start conducting your research today, so that you can select the apt provider who will service your unique needs.