The United States Small Business Administration recommends opening one or more business bank accounts to keep business funds separate from your personal funds.
There are many benefits to doing this, including features that benefit businesses specifically. These features aren't often available through personal accounts.
Many business owners choose to open multiple checking and savings accounts for their business. Let's explore why this is a good idea.
Who doesn’t love to be organized? Multiple accounts, created with specific purposes, can bring ease to your business's cash flow and savings. You can have one account established for paying taxes or payroll, or create savings accounts for specific upcoming projects.
Keeping these funds separate creates a clearer picture of where your money stands at any given time. In addition, you may enjoy different account features from your financial institution. In some situations, you could use a lower minimum balance for your expense account while a high-interest savings account, or, perhaps a CD, with a higher minimum balance might be more suitable for long-term projects and goals.
And don’t forget that being organized will help when the time comes to approach your bank for additional financing.
2. Strong Recordkeeping
An established, positive track record is something banks look for when considering financing or loan approval. Maintaining multiple bank accounts will show financial institutions that you are managing your finances responsibly.
Many lenders won’t consider approval without a dedicated business checking or savings account in place. With strong recordkeeping, you can quickly showcase your account management and organization.
3. Staying Secure
In a time of incredible innovation and connection, security is more important than ever and is something a small business can’t turn a blind eye to. Keeping your funds in more than one location can help shield you from cybersecurity attacks. Ask your bank about adding protection features into your accounts to keep your funds and business safer.
4. Keeping Money Separated
Having an account for operating expenses allows you to separate capital expenditures from day-to-day costs. This helps you understand how your business is performing and which operating costs are being covered. But don’t forget about identifying seasonal factors that affect your business. Certain times of the year could see an income reduction.
5. Planning Ahead
Setting up a savings account for future investments and projects can protect you from the demands your finances could face if any of your equipment fails or another unexpected incident occurs. Look at it as an emergency fund. It never hurts to have funds that can help in challenging times or for future development.
As you can see, having multiple business accounts helps keep you organized, secure and sets you up for future financial success. The right mix of accounts depends on your goals and specific business situation. Your bank can help guide you if you're not sure where to start. After all, your success as a business should be their priority.
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