You’ve probably discovered that running a business, even a small local operation, takes plenty of ongoing coordination. Diligent organization and proactive planning are essential, particularly within your financial department. If you own a business, it’s a wise move to open a business bank account to handle those transactions, and you might even be legally required to do so based on the type of entity you register.
A business account with a reputable bank will help you maintain accurate records that will come in handy throughout the year while also informing smart financial decisions. But if you think all banking is bland, it might surprise you to discover how useful online banking for small businesses has become in modern times.
The rise of Fintech (financial technology) is changing the dusty landscape of banking with online integrations, making it easier to conduct business from anywhere in more ways than you imagined. Keep reading to find out why establishing a business bank account is so important and how online banking has spiced up the industry.
Why Do I Need a Bank Account for My Business?
Even if you’re a sole proprietor with no employees on payroll, keeping personal and business banking separate will help you avoid painful financial headaches. Below are just a few reasons opening a business checking account is a beneficial move worth prioritizing.
Legitimize Your Business
If you’ve chosen a business name that doesn’t match your legal name, you need to develop your brand image to gain credibility under that identity. Banking transactions with vendors and customers that include your business name will come across as more professional and prevent any confusion upon reviewing those records. A separate bank account will also help legitimize your business as more than a hobby should the IRS question its classification.
Track Cash Flow and Expenses
Separate bank accounts create better bookkeeping, allowing you to track any funds entering or exiting your account without needing to subtract any personal transactions from the mix. Knowing exactly where your business stands at a glance with each statement can prevent costly financial mistakes as you plan out the best moves to make in the future.
Separation Simplifies Tax Season
As mentioned above, accurate accounting is vital for small businesses. You’ll be grateful you did when taxes are due, as you determine your revenue and deductions. Separate bank accounts make it a breeze to scan through each item, looking for the right data to plug into every tax form. Additionally, if you ever get audited, the process will be far less stressful if you have a bank account used exclusively for business purposes.
Business Loans Require Reliable Records
Lenders are looking for solid evidence they can count on you to make timely payments, and business loans have strict processes for approval, including the existence of a business bank account. You’ll need to provide financial proof that shows responsible record keeping, with accurate and organized information that lenders can easily analyze. Banish any ambiguity and prove you’re a trustworthy borrower with pristine paperwork.
