So, you’ve decided to take the plunge and start a business. Now that you’re earning money from your venture, it’s time to start thinking about keeping your finances in order.
Uncertainty is a significant factor affecting small and big businesses, evident from the outset of COVID-19. In fact, according to a survey administered by Facebook with Small Business Roundtable, about one-third (31 percent) of US small businesses were not operational during the pandemic.
It’s not just the sudden occurrence of a pandemic; your business should be ready for unplanned expenses at any given time. By having a dedicated bank account, you can set aside an emergency fund for your business. It’s a good practice, and here’s why.
1) Prepare for the Future
You should know how to open a business bank account from the start, so you don’t deal with problems later. Switching to a business account at the last minute will cause inconvenience for customers and suppliers. It is because they’ll still have to alter the banking details they have of you.
Moreover, with a business account, it’s easier for you to get your books in order. It will make the process smoother if you ever decide to apply for a loan to expand. It’ll also make it simpler for your business to be valued if you plan to sell it later on.
2) Track Expenses
A study by U.S. Bank states that 82 percent of small businesses fail because of poor cash flow management. Having a freestanding business bank account makes it easier for you to track your expenses and profits. You can quickly check the numbers, decide where to allocate your time and money, and how to reduce expenses.
If you go the other way and run your business with a personal bank account, you’ll need to go through these things manually. It can be quite a hassle and time-consuming when you’re better off concentrating on what matters most in your business.
3) Establish Credibility
Customers and suppliers feel safer working with you if they can make payments to and from a business account. It makes your business seem more trustworthy.
If you plan to put in an application for a loan, some banks will not lend money unless there’s a separate business account. If you want to scale up in the future but need extra funds, it’s best to have a business account ready. Likewise, some banks won’t allow you to accept business payments in your personal account.
4) Have More Financial Security
Keeping bank accounts separate means that your personal assets, like your home, can’t be seized if you get into debt. It is valid if you set up your business as a limited company.
On another note, the better your credit score, the easier for you to get loans, credit, and insurance. But if your personal credit score isn’t strong, keeping business finances separate gives you better chances of getting funds.
5) Save Time
When sorting out tax, getting your books in order with a separate account is less of a headache. It means you don’t have to spend countless hours figuring out which transactions were for your business. Moreover, you save money by not paying an accountant or bookkeeper to sort out what’s business and what’s personal.
Once you scale and start using accounting software, separate accounts make bookkeeping faster. This is because many free small business accounting software now integrates directly with your bank account. Through this, much of the bookwork is automated, saving you more time.
6) Avail of Business-Friendly Transaction Limits
Having a business will require you to make countless deposits, payments, transfers, and withdrawals. Unfortunately, some banks pose a limit on how much and how many transactions you can do with a personal account. But banks are more flexible if you have a business account since they know that your transactions are for your enterprise.
What to ask when choosing a business bank account?
Your business has different needs and priorities. And for this reason, you need to know how to find the right bank for your small business. To make your life simpler, here are the right questions to ask your potential financial service provider.
- Can I avail of an introductory offer? This is a way for most banks to entice business owners to open an account with them so take advantage of it.
- Are the fees and requirements flexible? Some banks waive fees if you meet a minimum balance requirement every month.
- What other options and services are available? One example is a mobile app where you can conveniently access your business bank account anytime, anywhere.
- Is there fund protection and insurance? The Federal Deposit Insurance Corporation (FDIC) provides insurance to financial institutions, so make sure the bank you pick is FDIC-insured.
Is your business already in full swing? Get a business sooner rather than later and reap all the benefits mentioned above. Remember to choose a bank that ticks all the boxes of the required features to run your business smoothly.
