What kind of bank account to use for your small business is one of the most crucial decisions you must make. In the modern era, small business owners believe they can conduct business transactions using their bank accounts. Using your savings account for business expenses is not advisable, even though you can use it in some circumstances. It makes it very difficult to keep your records organized, makes filing your taxes much more challenging, and requires excessive time going through transactions.
Although it is possible to use a personal account, it is almost always a bad idea. So, if you’re debating whether your small business requires a business bank account, consider it a yes. Open a business account with Aspire, and enjoy the benefits that can scale up your business. With Aspire, you get rewards like discounts on online advertising with Google Ads, legal software solutions with Zegal, accountant services with EBOS cloud accountants, e-commerce store services with Shopify, and many more.
Let us look into why small businesses must have a business bank account:
It is typical for entrepreneurs to try to cut costs occasionally. However, combining your personal and business bank accounts will make your bookkeeping more difficult. If you decide to combine your personal and business transactions, picture the length of your bank statement. If you continue in this pattern as your business expands, consider how the complexity and volume of your transactions will also inevitably increase. Every year, during tax season, you must be ready to record and outline all of these transactions meticulously. If you combine personal and business finances, this process will be much more time-consuming and stressful.
Create a credit profile for your small business
Banks will take into account more than just the company’s revenue. Lenders prefer to deal with businesses with their accounts, consistent income, and high credit scores. Combining personal and business finances puts your company at the whim of your credit rating. If you have a business credit score, applying for business credit cards, lines of credit, loans, and mortgages under the company’s name instead of your own will be more straightforward.
Every check you write contains all the information someone would need to try to use your account to pay a bill. So simple. Your account information is safe if you pay with your bank because this information isn’t included. Inquire with your bank about adding safeguards to your account, such as limiting withdrawals or highlighting out-of-the-ordinary transactions. If nothing else, this will alert you right away to any suspicious activity before it depletes your account.
When you are not a solopreneur and have business partners, they will also want access to and use of business funds. That is almost impossible if your business finances are connected to your accounts! It’s pretty unsettling to divulge your personal account information to numerous people. You don’t want to be in that circumstance. The people you’re opening a business with don’t necessarily tend to be trustworthy, but it’s always a good idea to proceed with caution. In business, things can go wrong, and the last thing you want is for your finances to be jeopardized if things don’t work out. So it is best to separate your personal and business finances and restrict access to only your business partners and employees.
Possibilities include financial savings, hassle avoidance, risk management, and future planning. All of these are made possible by having a business bank account.