Freelancers, Should You Set Up A Business Bank Account?

Financial worries are common enough for people both experienced and new to the world of freelancing. There are pensions and mortgages and holiday pay to consider and prepare for. Even more basic than this is banking. Have you considered how your banking decisions might be affecting your business?

As freelancers are often hesitant to call themselves business owners, the idea of setting up a business bank account might not even cross your mind. You might be planning to use your personalsetting up a freelancer bank account account as this might seem like the simplest option. While there’s nothing necessarily wrong with this, you might want to consider the benefits of setting up a business bank account.

Why set up a business bank account?

Keep things separate

The main reason why setting up a business account is that it’s much easier to keep track of your business expenses and income if they’re separate from your personal finances. If everything is in the same account, then it’s easy to get confused and lose track. 

Easier to report finances

Should you want to apply for a mortgage or another loan, lenders will often want to see reports of your earnings for the past couple of years. It’s a lot easier to show them if you have a separate bank account for your business as it is easier for them to see how well your business is doing and then approve you for a loan.

What to look for in a business bank account

While you’re not legally obligated to set up a business account, some banks might prefer it and have conditions which restrict you from using your current account for business purposes. You will have to check this with your current bank and weigh up all your options.

If you go for a business bank account here are a few things you should be thinking of:

Interest rates

Shop around for the best interest rates. Some banks don’t offer interest rates for business accounts at all, so it’s a good idea to shop around and take a look at various accounts before you commit to one bank.

It’s a good idea to look for a high interest account to set aside money for taxes. That way you can pay the tax and potentially have some left over that can go back to you or into the business.

Fees

Some start-up bank accounts are free for a period, usually about a year or 18 months before they start charging you. So make sure you don’t forget if and when the fees come into place so that you’re not left with a nasty surprise.

Always check for hidden fees before you sign up to anything like a bank account. You need to see what interest rates and penalties for late payments are like so that you’re not stung and caught out later.

Invoicing from abroad

This may not be a priority for everyone but for those freelancers who work with international clients, this can be a huge issue. You obviously need to get paid and dealing with different countries, laws and currencies can be a bit of a headache. You will want a bank account that makes this as easy as possible. So before you decide on a bank account, make sure you bear this in mind.

Source: http://freelancernews.co.uk/