I often find myself answering this question time and time again and thought it would be a good opportunity to share the information.
As I spend a fair amount of my time chatting with lean start up business owners and entrepreneurs, I get asked quite often:
“Is it a problem that a person uses their personal bank accounts to run their business income and expenses through?”.
My number one money tip is to ALWAYS separate your business and personal bank accounts.
The main reason is it is WAY less of headache to do the bookkeeping (yourself, not just for me) and actually know what you were spending your money on.
If you asked me what I did a week ago, I don’t find it that easy to recall that information because I have so much going on. Could you imagine what it would be like with a charge on a statement that is mixed up with all your personal transactions? Nope, no thank you, not fun or easy.
The next question I get asked is:
“I have a separate bank account for my business income and expenses but it is not a business bank account, is this a problem?”.
If your business structure is setup as a sole trader then this is not a big issue as everything that you earn belongs to you as an individual. Plus your business is usually you trading as a business name, so it is still you.
There is an issue doing this if you are trading under a different structure such as a company. This means that if you are holding business funds in a personal bank account under your name, then this will be considered to be withdrawing business funds. It can have tax implications and can make things quite complicated.
With all this said, even if you are a sole trader I still HIGHLY recommend that you open a business bank account. There are even a few banks that charge $0 fees on business accounts so you can’t use fees as a reason not to have a business bank account.
More importantly though, if you are resistant to opening a business bank account, my question to you would be – are you taking your business seriously??
Yes, really think about that question.
If you don’t want to take the step to open a business bank account, then you are most likely playing small in other areas of your business too.
Do you just consider what you are doing to be more of a hobby? A little pocket money on the side?
If your answer is no, then what are you waiting for? What is it that is holding you back?
I invite you to reflect on those questions and share should you feel drawn to do so in the comments.
I’d very much love to see you thrive and grow your business. The first step is to start treating it like one. If you aren’t taking your business or your bookkeeping seriously, then why would a prospective customer or client?
I know you could have a profitable business, it is about time you think you can too!
Profit First can benefit the growth of your business from DAY ONE!
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