Starting a business is exciting, but before you get carried away with marketing plans and product development, you need to deal with the nitty-gritty of business banking. To paraphrase the old saying, if you take care of the cents, the dollars will take care of themselves.
Many small traders begin their entrepreneurial journey without bothering to open a business bank account. In the early days, you might find it easier to trade using your personal bank account. After all, there are few if any fees associated with a personal bank account and it is less hassle. But, whilst it is easier, you could end up in hot water if the IRS decides to audit your accounts.
It is always better to kickstart your business on the right foot. Keep your personal and business finances separate by opening a dedicated business bank account. Your accountant will thank you and if you do end up being audited by the IRS, there is little chance of personal income being wrongly labeled as taxable business income.
Choose the Right Account
There is a multitude of business bank accounts on the market. The hard part is choosing a business bank account that suits your needs.
Business bank accounts differ from personal bank accounts in that they typically charge users for issuing checks and making other routine transactions. If you are not careful, you can end up paying a fortune in fees, just to administer your own account. However, opening a business account makes record-keeping much easier, so it’s time to bite the bullet.
Check out business accounts offered by all the big names, including online banks. Each bank will have a range of products, but you need to look at accounts aimed at small businesses. Pay close attention to the fees and charges. The best online banks are often cheaper than their big-name counterparts, but make sure you read the small print to be sure.
Minimize Your Banking Charges
Many banks offer free banking to startups. This is an excellent deal, as it will minimize your fees in the early days, which is precisely when cash flow will be limited.
Once your account is up and running, make a list of all fees, so you don’t get caught out. If your account charges for issuing a check, use online banking to pay suppliers. Does your bank charge for an overdraft facility? Avoid going into the red.
Keep a close eye on your transactions and if you spot any fees you weren’t expecting, query them with your business banking liaison officer.
Open a Savings Account
Once the money is flowing in and business is booming, open a business savings account connected to your main checking account. Move any excess cash into the savings account so you can make the most of an enhanced interest rate.
Business banking needn’t be a huge headache if you select the right account and monitor it closely. Be aware, however, that you will need to have a decent credit rating if you want to open a business bank account.