Running your personal and business finances through the same bank account or credit card? Bad idea!
The Case for Separation
Here are some of the main reasons to use a separate bank account or credit card for your business:
- Time: your bookkeeping will take more time if you constantly have to question whether a transaction was personal or for your business.
- Money: time-consuming bookkeeping often leads to higher bookkeeper or tax accountant bills.
- Judgement: if your dedicated business bank account is steadily climbing, your business is probably doing well and you can more confidently take up new opportunities.
- Spending control: too many people (including me!) spend more when they see lots of money in their bank account, but most businesses need to keep that money for future supplier payments.
Tips for a Smooth Separation
Most businesses can quickly open a new business bank account or credit card. Here are some tips:
- Update the payment methods you regularly send to customers/clients, e.g. invoices and statements.
- Update all suppliers who automatically debit your old bank account or credit card.
- Contact clients and suppliers to ensure they use the new account or credit card details.
- Keep the old account or credit card open for a few months, to catch anything missed from the above three steps.
- Call clients or suppliers who have not switched over after a few months and stay on the phone with them until they make the necessary changes.
- Consider keeping the existing account/card for business use and move all personal transactions/debits to a new account/card.