Separating business and personal finances - the main benefits

Starting a new business is one of the most exciting times in an entrepreneur's life. Building something from the ground up is gratifying in a way few things are. Many business owners would agree that while the first couple of years can be scary, it’s worth it for the satisfaction of running a company. But many wish there was a bit more help when taking those first few steps!

One such area that many business owners wish that they had a bit more help with is finances. And it’s not necessarily just questions on how to make a profitable business, but how to handle your finances easily and sensibly.  

For example, the decision to keep their personal and business finances separate. This is an understandable mistake many business owners make early on, as it may seem easier for new entrepreneurs to intermingle their personal and business finances. After all, it all ends up in the same place, doesn't it?

But separating business and personal finances is very useful for both the business and the entrepreneur. Not only for accounting purposes, but also to help you keep a keen eye on your business growth and profits. Ultimately, while it may feel like your business is an extension of yourself, your business finances need careful consideration and management.

What is a business account?

A personal checking account and a business bank account may seem similar, but there are several key differences between the two. We can see these differences once we define what a business account actually is. 

In simple terms, a business bank account is an account used solely for business finances rather than personal expenses.

Unlike personal accounts, which are opened under a person's name, business bank accounts are opened under the business's name. This means that all the transactions, transfers, and other financial activities are officially conducted by the business rather than the owner. This is true even if the business name is the same as the owner's name. 

What can business accounts do?

For the most part, a business and a personal bank account operate in much the same way. With that being said, a business checking account does give business owners more options and features. Of course, some features will change depending on the account provider.

How do you start a business account?

Each account provider will have a different process to signing up for a business bank account. Make sure you carefully consider the pros and cons for the provider you choose, including looking at prices for opening or closing accounts, transfer rates and withdrawal rates.

In many countries, business banking is open to anyone with a registered business. These bank accounts can be set up by any sort of registered business, including sole traders, limited companies, and partnerships. The exact requirements for opening business bank accounts do vary from place to place, so it's worth checking your local laws. 

A great added value for business owners would be if you could sync your bank account directly with your payments device and point of sale solutions

My Business, the new financial service app from Epos Now, gives easy business money management to you, the business owner. This includes access features you can’t always get with a personal account. These exciting features include:

• A business bank account, powered by Adyen - which can be approved in as little as 24 hours.
• A free, centralised app that allows you to see your business account information in one place on your phone or tablet.
• Swift and secure business transactions that get your money moving to where it needs to be.
• Fast access to capital investment with Epos Now Capital.
• To-the-minute business reports that give you a bird's eye view of your business.
• Free next-day payouts from your business sales so you can keep control of your money. Additionally, same-day payouts are available for an additional fee.

Why should I keep personal and business finances separate?

Separating business and personal finances is a big step in your entrepreneurial journey and establishes your company as a legitimate business. However, if you're not still fully convinced that you should take the plunge and separate your personal and business finances, don't worry. We've compiled a list of compelling reasons in favour of separation. 

Liability protection

Perhaps the number one reason you should separate personal and business finances is liability. Liability is a very serious matter in both the retail and hospitality industries. If the worst happens and your service or products break the law or injure someone, you need to be as protected as possible. There are many cases of promising business people being caught out by personal liability.

Separate accounts define business owners as a separate legal entity from their company. This is very important as it protects the owner from liability in most cases. Different types of companies, such as limited liability companies and partnerships, offer varying levels of protection. 

Operating across multiple countries, or in a country outside the UK? Different countries handle liability differently so you should research your local laws.

Build business credit score

Throughout their life, a person builds their personal credit score. Businesses also build up a credit score as they operate. If small business owners intermingle their business and personal finances, they'll share a credit score with their business. This is problematic for several reasons.

If you share a credit score with your business and it goes through a rough patch, this can have a negative impact on your credit score. A low credit score can make it difficult to take out loans or get a mortgage. Also, if your company expands and requires a business loan, some lenders can be cautious about extending credit to an individual.

Simplified accounting

Business funds are difficult to keep track of at the best of times. Business expenses, debts, and assets can easily get tangled up and become hard to manage. A large part of any business owner's time is spent ensuring their business finance is healthy and well-managed. If a person's business and personal finances are tied up together, accounting can become untenable.

By keeping business and personal finances separate, business owners can keep accountancy simple. Two smaller separate accounts are much easier to manage than one big combined account. Apps like Epos Now My Business make things even simpler by giving you detailed business reports that allow you to take control of your finances. 

Keeping your finances separate with Epos Now

Taking the first step to separate your business and personal finances can be scary and overwhelming. Luckily, Epos Now My Business simplifies the process and lets you apply for an account in minutes.

With Epos Now My Business, business owners are given a business bank account, powered by Adyen. Here you can store your money safely and make fast payments. But you can also automate end-to-end reconciliation from your Epos Now point of sale (POS) system and Epos Now Payments service to your Epos Now My Business account. Access all the information you need to take control of your business finances - in one easy-to-use app.

If you're interested in hearing more about Epos Now My Business, check out our dedicated app page to find out more.

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