If you're thinking about starting your own small business, it may
be tempting to skip a few steps and worry about setting up a business
checking account at a later date. After all, you can just use your
personal accounts until you're "ready" for a business account, right?
Many people do mingle their business and personal accounts, it's true. But there are several reasons why it's not a good idea-and one of the best reasons concerns your cash flow. As any commercial banker will tell you, it's always advisable to have as much cash flow as possible, and next to keeping revenue higher than spending, a business checking account is one your best tools when it comes to managing that cash flow to your advantage.
Another good reason to have a business checking account is that it allows you to keep much better records, which in turn give you a better picture of your business. If you're using your personal account for business, there's very good chance that you will end up spending personal money that you didn't intend to spend, or that you'll miss out on the chance for tax deductions because your records are too difficult to unravel.
This is compared to the case with business checking accounts, which allow you to easily keep track of expenses and deposits for improved record-keeping. Plus, paying for goods and services with a business account makes a better impression when you're first starting out.
Of course, a business checking account won't be able to effectively do its job if it's not managed properly. Here are a few tips:
Tip One: When it comes to choosing a bank to work with, make sure you do your homework. Do you like the service hour the bank provides? Are there enough mobile banking options to suit your needs? Are the fees reasonable and competitive? These are just some of the questions you'll want to ask yourself and your prospective bank.
Tip Two: Get a feel for the other products that the bank offers, such as small business loans or rewards programs. Even if all you need right now is a business checking account, you'll likely need more service and products as your business grows and becomes successful.
Tip Three: Evaluate the banking team. Do you have good rapport with the bank's staff, or with the account manager who would be assigned to your account? Are they available when you need them and helpful in terms of providing information?
Tip Four: Keep good records. This means balancing your account each month, recording transactions, and knowing where each payment has gone, and for what purpose. By the way, it's not enough to merely record the payee and the check number. You should also have an accounting system that categorizes the payments into proper categories, like payroll, marketing, lease payments, and so forth.
Tip Five: Maintain a high balance whenever possible. This may sound obvious, but it's amazing how fast a business that's in development or growth stages can run through cash. A higher balance may help you avoid fees, protect you during credit checks, and ensure you have the cash necessary to meet unexpected expenses. These are all reasons why it's a good idea to work with your creditors and vendors to spread out monthly payments, so that everything isn't due at once.
Many people do mingle their business and personal accounts, it's true. But there are several reasons why it's not a good idea-and one of the best reasons concerns your cash flow. As any commercial banker will tell you, it's always advisable to have as much cash flow as possible, and next to keeping revenue higher than spending, a business checking account is one your best tools when it comes to managing that cash flow to your advantage.
Another good reason to have a business checking account is that it allows you to keep much better records, which in turn give you a better picture of your business. If you're using your personal account for business, there's very good chance that you will end up spending personal money that you didn't intend to spend, or that you'll miss out on the chance for tax deductions because your records are too difficult to unravel.
This is compared to the case with business checking accounts, which allow you to easily keep track of expenses and deposits for improved record-keeping. Plus, paying for goods and services with a business account makes a better impression when you're first starting out.
Of course, a business checking account won't be able to effectively do its job if it's not managed properly. Here are a few tips:
Tip One: When it comes to choosing a bank to work with, make sure you do your homework. Do you like the service hour the bank provides? Are there enough mobile banking options to suit your needs? Are the fees reasonable and competitive? These are just some of the questions you'll want to ask yourself and your prospective bank.
Tip Two: Get a feel for the other products that the bank offers, such as small business loans or rewards programs. Even if all you need right now is a business checking account, you'll likely need more service and products as your business grows and becomes successful.
Tip Three: Evaluate the banking team. Do you have good rapport with the bank's staff, or with the account manager who would be assigned to your account? Are they available when you need them and helpful in terms of providing information?
Tip Four: Keep good records. This means balancing your account each month, recording transactions, and knowing where each payment has gone, and for what purpose. By the way, it's not enough to merely record the payee and the check number. You should also have an accounting system that categorizes the payments into proper categories, like payroll, marketing, lease payments, and so forth.
Tip Five: Maintain a high balance whenever possible. This may sound obvious, but it's amazing how fast a business that's in development or growth stages can run through cash. A higher balance may help you avoid fees, protect you during credit checks, and ensure you have the cash necessary to meet unexpected expenses. These are all reasons why it's a good idea to work with your creditors and vendors to spread out monthly payments, so that everything isn't due at once.
