Are you one of the 27 percent of small business owners who use the same checking account for business and personal finances?
If yes, it’s understandable why you’re doing it. You’re probably running a small sole proprietorship. You don’t see any reason to separate the business’s finance from yours because you’re the business.
However, you’re making a big mistake. A vast majority of small businesses that fail can attribute their failure to financial challenges. Having a business bank account can go a long way in helping you to avoid those challenges.
In this article, we’re exploring the benefits of having a separate business account. Read on to learn more!
Easier Management of Business Finances
In entrepreneurship, just as in your personal life, financial management is a vital skill. But while you might have some wiggle room to play around with money in your personal life, in business the stakes are much higher. If you mismanage business finances, the business could collapse, leaving you with big losses that can drive you into personal bankruptcy.
A bank account for business gives you the tools you need to be better at managing your company’s finances. At a basic level, it’ll be easier to track the business’s revenues and expenses, assuming all transactions are going through the account.
With a clear view of revenues and expenses, it’s easier to calculate your profit or losses. Consequently, you’ll have the right information to file your tax returns as a sole proprietor.
Gives Your Small Business a Professional Face
Picture this:
Your name is Jane Doe, and the name of your business is Comfort Furniture. After supplying some items to a client, you send them an invoice with your company’s letterhead. Yet, you’re asking them to make the payment to an account that’s registered under your name.
How does that look?
Using a personal bank account for business purposes makes you and your company look unprofessional. Some clients might even call you to make sure that you have indeed stated the correct bank account.
The same applies when you’re dealing with a bank. Imagine applying for a business loan or line of credit but the account you’re using is under your name? The bank will likely advise you to open a business bank account before they can consider your request.
Opening a separate business account is one of those little things that you can do to give your business a professional face.
Build Your Business’s Credit
Your business needs to build its own credit. Lenders use business credit scores to determine the creditworthiness of a business.
Opening a business bank account is the first step toward building your business’s credit. The next step is to take out a business loan or line of credit and build a good repayment history.
Gain Access to Useful Features and Services
Business banking isn’t just about receiving payments and sending and withdrawing funds. Depending on the bank, there’s a bevy of useful services you could have at your disposal.
For example, some banks offer corporate cards, which allow businesses to, among other things, manage travel spending and allow authorize employees to purchase goods and services. Check out https://bentoforbusiness.com/features/corporate-cards/ to learn more.
Open a Business Bank Account
It’s clear that a business bank account is a must-have. Your company will look more professional, you’ll be in a better position to manage business finances, and the account will enable you to build business credit. There are more benefits you stand to reap, so take the step and open a business account today.
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