Starting a business requires a lot of hard work and dedication. It also involves keeping track of your expenses and making sure you have enough money in your business bank account to cover them.
From monthly invoices to accountancy fees, travel costs and more, it’s essential to stay on top of your business expenses in order to remain profitable and ensure you’re getting the most out of your investments.
In this blog article will explore the importance of keeping track of your business expenses and provide advice on how to do so.
Who needs to have a business bank account?
When providing goods or services, it is advisable for individuals to open a business bank account in order to maintain clarity and transparency when it comes to transactions. However, there are certain instances in which opening such an account is obligatory.
As a sole trader, your identity is intertwined with that of the business. Therefore, it is legally permissible for you to use the same bank account for both personal and professional transactions.
Umbrella company contractor
If you contract through an umbrella company, you are regarded as an employee of the PAYE Umbrella. Therefore, all payments to the end clients or recruiters are administered via their own internal processes.
Limited company contractor
As an owner of a limited company, you are legally distinct from the business itself. While you act as a director, you are also considered an employee. Accordingly, all financial transactions must be conducted through the business and cannot be personally funded.
What are the benefits of opening a business bank account?
While in some circumstances it isn’t necessarily a requirement to have a business bank account, there are several advantages to doing so. Firstly, a business bank account provides full transparency for all business transactions and allows for a clear trail on payments from the end client.
Additionally, a business bank account ensures all claimable expenses are clearly identified through bank statements, resulting in less room for error and greater corporation tax relief.
Moreover, it simplifies the process for annual tax returns, as all transactions will be in one place, saving time and resources. Finally, having all business transactions in one place adds to credibility in the eyes of HMRC, as they will have full confidence in all the details.
How do you choose which banking provider?
- Are there any minimum balance limits? Certain banks may impose a set limit to bypass unessential expenses. Make sure to confirm this ahead of subscribing.
- Do you need to deposit a certain sum to open the account? In some cases, banks might necessitate an initial deposit ranging from £1-£5,000 to get a business bank account. Double check this before agreeing.
- Are extra charges applied for exceeding a certain number of banking transactions? Banking services tailored to freelancers and contractors must include an adequate number of business transactions to avoid any fees. The typical count is approximately 30 banking transactions per month. Calculate the additional costs for exceeding the specified limit, as well as the period of time it applies.
- Do the bank statements connect with your bookkeeping software? Investigate if the package available is compatible with your bookkeeping software. Platforms such as FreeAgent link to various banks, making it easier to review all business transactions for taxation purposes.
How can RHJ Group help your business?
Our services are designed to help you build a successful lifestyle, whether you’re looking to expand or start a business, seek help with taxes or manage your finances.
Working with the experts at RHJ Group, the possibilities are endless as you can startup or expand in Cyprus, Malta, Portugal, the United Arab Emirates, the United Kingdom and even the United States of America.
Why RHJ Group? We have access to expert accountants, lawyers, business support professionals, financial advisers, solicitors, banking agents, real estate agents & so much more.