Why should you have more than one business bank account?
It may seem like a great idea to have all your money in one place, but actually, it makes business sense to have at least one back up account. There are sound commercial and ethical reasons for this – whether you are a sole trader or a limited company.
Mostly, this is about making sure that you are protecting your money – allowing you to be able to pay your expenses, secure your payroll and give your business a financial cushion if problems arise. And it’s worth remembering that it’s not just your business that can have problems – your bank could also get into trouble, and you need to have a plan for that.
Protecting against fraud
Sadly, there will always be people who are after your money. If all your money is in one place, and fraudsters or scammers access it, they could clean you out completely. That leaves you not only with the headache caused by the fraud, but the inability to pay essential bills whilst you get things sorted out – and that can lead to further problems for your business. Splitting your money between two accounts means you will have a working backup account if you need one.
Technology problems
Most of our banking is done online now, and so you are relying on the technology working properly in order to access your funds. If your bank’s app or online service goes down for any reason, you’ll be left unable to access your money – possibly when you need it most. So again, have a backup account in place so that if your main account is inaccessible, you can still maintain your day-to-day business.
Separate accounts for separate expenditure
If you have tight cashflow, it can be useful to have an account where you put cash for essential expenses like bills or wages. You will need to make sure that you pay into this account on a regular basis – so set up a standing order or make a diary note to transfer funds when you have them. This means that you have a dedicated account for the bills you have to pay and you know you can cover the bills.
Switching to ethical banking
Businesses are increasingly looking for more ethical places to keep their cash. The big national banks are still heavily invested in fossil fuels, and so you need to consider whether you are happy for your money to fund this sector – particularly if you are starting to make public statements about climate and your own approach to sustainability. Moving your accounts to banks such as Triodos or Starling will help to support your approach to climate change.
To find out more about how you can separate your accounts to give your business a stronger foundation and help you manage your cashflow, contact us today.
Please note: This is not meant to constitute professional advice. It is generic guidance only and things may have changed since it was written –please always seek specific & tailored advice for your circumstances.