It is understandable that you want to save money because you are starting your own business. That is very wise. Personal accounts are also less expensive; business accounts require a monthly fee. And it’s for this reason that, at first, using your personal accounts may seem appealing. However, if you are a Singaporean business owner, you can access the best business account Singapore offers, which provides the best credit and services.
While it is possible to use a personal checking account for business purposes, there are risks involved in mixing business and personal funds. It can complicate accounting and impact taxes, putting you at risk of legal liability. So, whether you work from home or own a multimillion-dollar corporation, there are numerous reasons to separate personal and business finances.
Wouldn’t it be awkward if you were the client and had to make a payment to an individual’s name rather than the company’s name? The client wants the name of the company issuing the invoice to match the name of the bank account to which they are making a payment. To avoid embarrassment when a client asks for your business bank account, or worse, losing that client because you cannot show them one, it is always best to have a business account open in the name of the business. Keeping both accounts separate will make record keeping, tax preparation, and financial management easier. Consider the hassle of sorting through your personal checking account transactions during tax season to determine which were for business and personal reasons. When your funds are in one place, it’s easy to make a costly error, such as miscalculating your taxes. Sharing your account with family members can become even more complicated. Therefore, combining both accounts is a grave mistake.
Using your personal accounts for business sounds wonderful until your customers want to pay with credit cards. Without a payment service provider, you cannot process credit card payments through a personal bank account. Moreover, business bank accounts are primarily designed for these kinds of transactions. Though having a business bank account may result in higher fees than having a personal accounts, that tradeoff may be worth capturing payments in the most efficient way for your customers.
If you use the same account for personal and business purposes, you’ll have to do extra work to separate personal and business expenses. It can be challenging to determine which expenses are business-related. Instead, someone must go through and re-categorize all the expenses. It’s a pointless manual step that reduces business productivity. Furthermore, memory fades over time, making it even more difficult to re-categorize. So it’s an unnecessary headache that will exhaust you, reduce productivity, and increase confusion.
You get a clear-cut picture of your company’s finances. Small businesses often connect their accounting software with their bank account and pull real-time data about the business’s financial state. However, if your business funds are in your personal accounts, this will not work. With a business bank account, you can keep a check on your finances, get cash injections if the balance is low, and use it wisely somewhere if the balance is high.