When you’re establishing your business, your finances are likely to be at the forefront of your concerns, so opening a business bank account for your company is essential as it will help you maximise your revenue.

And while it might seem like an obvious step, business bank accounts are too often overlooked, particularly when it comes to sole traders and micro business owners.

It’s not a legal requirement to open a dedicated business bank account, so it’s understandable that some business owners don’t realise the need for one. With a better understanding of the benefits, the necessity becomes clear.

How can a business bank account help you?

Business bank accounts don’t just keep your finances separate from your personal assets, they help you manage and safeguard your earnings while also improving your cashflow and consequently accelerating your business growth.

Cashflow

Many banks offer business current accounts that are built specifically for small business owners. As a result, they include features designed to help you manage your cashflow.

For example, the HSBC Kinetic Current Account offers a cashflow insights tool and a forecasting feature to help you plan ahead in managing your business finances.

With this information at your fingertips, you can not only predict your regular outgoings, but you can also begin to plan your spending around these trends, meaning you’re less likely to overspread and more likely to spend money at the right time during the month.

Streamline your bookkeeping

Running all of your company’s income and expenses through a dedicated business account makes it easier for you to track outstanding invoices, generate financial statements and apply for business loans and grants.

And, the more time you save on your day-to-day processes, the more time you have to spend either growing your business or taking some time to relax.

Simplifying your tax preparation

Using a business bank account also makes it easier to file your taxes (a notoriously tedious task for small business owners).

With the right bank account, you won’t need to untangle your business and personal expenses every year just before the tax deadline – that’s already done for you.

Many of these business bank accounts also integrate their software with popular business accounting software, which simplifies the process even further.

Protect your personal assets

Depending on the type of business you run (an LLC, partnership or corporation), your company’s legal structure could actually protect your personal finances in the instance a lawsuit is taken out against you.

However, if your personal finances are mixed with your business revenue, even your personal finances could be compromised if legal action is taken.

Greater protection for you and your business

Having a business bank account is a means of protecting your identity as the account will be under your business’ name. As the number of transactions you make will likely be higher than on your personal account, you’ll need greater security. Banks tend to have information in place to warn business banking customers of potential scams, as well as security systems that can help you spot scams.     

It keeps you safe too – if one of your accounts gets hacked, the other is more likely to still be safe.

Build a credit rating for your business

Having a dedicated business account is a way of building a credit rating for your business. This can better your likelihood of securing a loan if you need one. Just make sure you manage your business account well.      

What to look out for when choosing a business bank account?

Which bank account suits you best will depend on a few factors, like how much revenue you turn over and the type of features you’re looking for.

However, if you’re looking to open a business bank account, here are some of the factors you should consider first:

Fees

The lower the fees associated with the account, the better it is for your budget (some accounts even boast a zero-fee option). However, if you’re looking for a range of features, it’s reasonable to expect a small monthly fee.

You should also consider additional fees that might be added onto the monthly cost, for example ATM fees or overdraft fees.

Limits

Some business accounts place limits on how many monthly transactions and cash deposits you can make before you pay a fee, whereas others offer unlimited transactions.

Understanding your specific needs is essential here: if you know you don’t make many cash deposits per month, opting for an account with a limit and lower monthly fees might work best for your business. On the other hand, if you make a lot of cash deposits, it might be worth paying a slightly higher monthly fee for an account without limits to prevent reaching your cap.  

Useful perks

Often, business bank accounts will come with perks. However, sometimes these perks are things you’ll never use, but you might be paying more for them.

If you think a particular perk might actually be useful for you or your company, you might decide it’s worth it, but don’t choose an account just because the perks sound good on paper.

The bottom line

A business bank account is more than just a financial necessity; it’s a tool that streamlines bookkeeping, protects personal assets and enhances cash-flow management. By carefully choosing the right account, you can leverage these benefits to drive growth, simplify tax preparation and safeguard your financial future.

You can apply for a new business current account in minutes with HSBC Kinetic Current Account. Simply download the HSBC Kinetic app and apply in minutes, with most accounts opened in 48hrs.

Suitable for sole traders or a limited company with a sole director who is also the sole shareholder, find out more at business.hsbc.uk.

HSBC Kinetic is subject to eligibility, T&Cs, credit check and fees apply.

This article was written as part of a paid-for advertising content campaign with HSBC.

Read more

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