When you start a new business, you want to make sure that your finances are in order. You need to keep track of all your expenses and make sure there's enough money in the bank for payroll and other operating costs. Opening up a business account is one of the most effective ways to do this. Keep reading to see why having a separate bank account for your startup is important.
1. Keep your business finances in one place to easily assess performance
Business and personal finances are two different things. Keeping them separate will help you keep track of your business finances and make it easier for you to manage both sides of your life.
With a business bank account, you have one place where all of the money from your business is deposited. This makes it easy to see how much money has come into the business and how much has gone out, as well as gives you an overview of any outstanding debts or balances remaining at any given time.
You can also easily tell if you are on the right road business-wise or if it is time to establish new goals and take a different course of action by having easy access to accounts that detail all of your company's expenses and revenues for each month.
2. Pay taxes easier
One of the biggest advantages to having a business bank account is that it helps automate your tax preparation and you can pay taxes directly from your business account. Your accountant is able to easily link your business bank account transactions with tax preparation software since business income and expenses all flow through one account. Paying your taxes becomes so much easier instead of having to write checks and mail them in. It also saves you tons of time since you don’t have to fill out any paperwork when paying taxes through this method.
And in the event that you or your company is ever audited by the IRS, you will have a clear audit trail, reducing the likelihood of getting into serious trouble.
3. Make your business appear more professional
It could appear quite unprofessional if you keep paying expenses with a personal bank account. Customers and other people you do business with might assume you're just getting started, you don't think your company will last, or you're too lazy to make the effort to register your company as a legal entity. By making payments from money sources that are branded with your company's name, a business bank account enhances the reputation of your enterprise. It demonstrates your serious approach to business, which encourages others to also take your business seriously.
4. Manage funds more easily
Keeping track of your funds is a crucial part of running a business. You can see how much money is coming in and going out, how much money you have left for payroll, and what bills need to be paid. If you are managing multiple accounts with different banks, this can be difficult to keep track of.
5. Keep your business and personal life separate
When you’re starting a business, it’s tempting to keep your business and personal finances in the same place. It can seem convenient to have all your money come from the same account and go into one big pool. However, this approach has several disadvantages:
You don't want to run out of money for either your business or yourself if you've already used up all your reserves on one of them.
If something happens (like a fire or computer crash), you don't want any of the funds from either account compromised.
It's easier for the IRS if they only have to deal with one set of books for each type of income—not two or three!
If you're running a successful small business—or even just hoping that someday soon you'll become one—it's vital that all aspects of running said enterprise is kept separate from anything else going on in life right now. This means making sure each bank account is clearly labelled as belonging either solely towards personal use or solely belonging towards company use.
6. Set yourself up for future growth
If you’re ready to grow your business, having a business bank account is an important step. First of all, the more money you have in your business bank account, the more you can borrow. More importantly, though: when it comes time for your business to scale up and start hiring employees (and pay them!), being able to show that there’s enough money in the account helps convince banks and lenders that they should lend you even more money.
7. Establish business credit history to apply for loans or open lines of credit
Without a business bank account, you'll have to rely on personal credit cards and loans to fund your company's operations. While this isn't necessarily a bad thing, it does mean that the lender has no way of determining if your company is trustworthy or not. If you're looking for investors or want to get a loan from a bank, having established financial credibility for your business is crucial. By using your business bank account as an extension of yourself (the CEO), lenders can see that your company has been in operation for some time and will be able to pay back any loans it receives from them in full.
8. Be eligible for special business offerings
Having a business bank account can grant you access to special business offerings such as free payroll services, credit card processing, free internet banking services and more!
Conclusion
A business bank account is one of the most important tools you can have to run your business. It will help you save money and make sure that everything is in order. If you don't yet have one, you should try to get the process of creating it started!
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