How many business bank accounts do you need?

1. Having more than one business bank account can streamline financial management for specific purposes like savings, budgeting, payroll, or taxes.
2. Maintaining separate accounts can be crucial where you have distinct businesses, even under the same ABN, to ensure clear financial reporting.
3. Factors like business structure, transaction volume, and fees can help guide your decision on the number of accounts to maintain.

Choosing the right number of business bank accounts

Effective financial management is essential for any business owner, and choosing the right number of business bank accounts can play an essential role in this process.

While a single business bank account might be sufficient for some, there are scenarios where opening more than one business bank account makes perfect sense. For example, you may need additional accounts for purposes like budgeting, saving for taxes, managing payroll, or handling operational expenses.

This article explores when it can be beneficial to open multiple accounts and the factors to consider.

Single business with one ABN

For businesses with a single ABN, it is considered best practice to have one dedicated business bank account. While sole traders can use a personal bank account, having a dedicated business account can reinforce professionalism and makes it easier to assess your business’s financial health. Keeping business finances separate means you can easily track income and expenses, while simplifying tax reporting and minimising potential legal complications.

Explore the benefits of separating business and personal finances to protect yourself and your business.

Multiple businesses with one ABN

If you operate multiple businesses under a single ABN with registered business names, it can be highly beneficial to have separate bank accounts for each business.  For example:

• For similar businesses, such as two retail stores that sell related products, a single account may be suitable. However, tracking income and expenses for each store will require meticulous bookkeeping.  As such, having two accounts, one for each store, can help.
• For distinct business, like a retail store and a consulting service, separate accounts can be essential. This separation ensures clear financial reporting for each venture, simplifies tax preparation, and provides a clearer picture of each business’s profitability.

Can you use the same bank account for two businesses? Technically, yes, but it’s not ideal. The added complexity often outweighs any convenience.

Multiple businesses with multiple ABNs

If you own multiple businesses, each with its own ABN, having separate bank accounts for each is often said to be non-negotiable. This setup can be crucial for:

• Legal compliance: it helps ensure your financial records align with each business’s unique ABN.
• Liability protection: mixing finances can expose one business to risks association with another.
• Accurate financial management: separate accounts help track profitability and manage taxes efficiently.

Businesses with complex structures

If your business operates with a more complex structure, such as subsidiaries or DBA (Doing Business As) entities under a parent company, financial management can become trickier.

While some businesses might consider a single account for the purposes of simplicity, this can introduce significant risks, including reporting errors or liability concerns. Seeking professional advice is highly recommended in these cases.

In scenarios where subsidiaries are managed independently, opening separate accounts ensures clearer financial reporting and greater control.

5 factors to consider when making your decision

It makes sense to compare business banking accounts, and when deciding how many business bank accounts you need, consider the following:

1. Number and nature of businesses: similar businesses might share an account, but distinct ventures benefit from separation.
2. Transaction volume: high transaction businesses may require additional accounts to manage cash flow effectively.
3. Legal structure: the complexity of your business structure will often dictate the need for multiple accounts.
4. Growth projections: if you’re scaling your business, having dedicated accounts for future needs can streamline operations.
5. Fees: multiple accounts can potentially lead to higher banking fees, highlighting the importance of evaluating NAB’s business banking products to find cost-effective solutions.

Streamline your business finances with NAB

We offer a range of products tailored to suit businesses of all sizes:

• NAB Business Everyday Account: ideal for everyday business banking needs, with a $0 monthly fee option for small businesses.
• NAB Business Cash Maximiser: perfect for setting aside funds for budgeting or tax purposes while earning interest.
• NAB Internet Banking: manage multiple accounts seamlessly with payment limits up to $100,000.