If you’re a small business or a sole trader starting out, you might be wondering if you’ll need to open a separate bank account. The short answer is yes, it’s a good idea, and the sooner the better, even if you run your business part time. Here’s why.
Spend less time (and money) on admin
When tax time comes, it'll be a whole lot easier to get your books in order if you have a separate account for your business. It'll mean you won’t have to spend hours trying to work out which transactions were for your business. If you use a bookkeeper or accountant to do your tax, you won’t have to pay them to sort out what’s business and what’s personal.
Also, once your business starts using accounting software, having a separate business account will make bookkeeping a lot easier. That’s because many accounting packages now can integrate directly with your bank account, to automate a lot of the bookwork. For example, you could connect software like Xero, MYOB or Quicken to a NAB Everyday Business Account, which has no monthly fees.
Track your business easier
With a separate business account you’ll find it much easier and simpler to track your expenses, income and profit. You’ll be able to quickly look at the numbers and then make decisions about where to invest your time and money, and where to reduce expenses. If you run your business through a personal bank account, you’ll have to find a way to manually work out all these things, and that can be difficult and time-consuming.
Prepares you for the future
It’s much easier to have a separate bank account set up from the start, so you won’t have the hassle of changing it later on. If you start with a personal account then swap to a business account, you'll have to tell your suppliers and customer to change the banking details they have on file for you.
Also, with a business account you’ll be better prepared to get your books in order. This'll make it easier if you decide to apply for a loan or obtain finance to expand. It'll also make it much easier for your business to be valued, should you consider selling it.
Deductions are easier and simpler
A separate business account can make it a lot easier to identify and deduct any bank fees from your tax liability. When tax time comes you won’t have to sort through various accounts to sort out business fees from personal banking fees.
How to open a business bank account
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The information contained in this article is correct as of July 2018 and is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, NAB recommends that you consider whether it is appropriate for your circumstances. NAB recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.