It is beneficial to have a separate bank account for your business. Some of these include letting business owners manage cash flow, keeping track of expenses, and easy calculation of tax liabilities. Compared to private and personal business bank accounts, business bank accounts are specifically meant to make a business survive in the ever-changing market. When selecting the right bank for your business, you must pick one that charges low-interest rates on loans. A business account helps the owners of the company keep track of business transactions. Such transactions are separate from personal expenses. Below are the benefits of having a business bank account for your company.
1. Organized Business Records
With a business bank account, you can keep your business records organized. This is a crucial part of the business program and must be prioritized by a business owner looking for success. The account can help you separate your personal transactions and expenses from those of your business. With organized business records, monitoring the profitability of your business becomes easier.
A good example is a case where your business earned €10,000 and spent €2,000. To get the net profit from the previous financial period, you will need to subtract €2,000 from €10,000 to get €8,000. In this case, the €2,000 accounts for the gross expenses for the previous fiscal period.
Now, you can see that if you mix your personal account with the business account, determining the profit margin becomes laborious. To determine the actual profitability of your business, you must identify the personal expenses and then omit them from the calculation. Most companies have realized the importance of having business accounts with reputable financial institutions so that they get clear records regarding business profitability.
2. Accurate Taxes and Deductions
Having business transactions separated in the checking account is not just good for clean financial records. With a business account, you can also file taxes easily. If you want to save time filing your taxes, you must have your personal transactions separated from your business transactions. However, many small business owners make the mistake of mixing their finances up, hence making them spend a lot of time filing taxes.
For accuracy, you need a business bank account to file taxes. By looking at the business transactions in the business bank account, you take the details and record them in the tax return. This process can be completed within a very short period so that you embark on other business undertakings. If you have transactions mixed in one account, you will lose accuracy since the figures might get mixed up. Note that you are likely to face fines if you don’t file your taxes accurately.
Also, from your tax returns, you can easily deduct the business expenses. This is a process that could be easier if you have a business checking. You need to provide the details to the tax body to indicate that the transactions were for the business and not yours.
3. You Will be Able to Take Credit Cards
You limit the size of the market and the customer pool if your business can only accept cash payment. Today, competition has gone a notch higher, with companies accepting credit cards to enhance their profit margins. However, this is not possible unless your business has a bank account separate from yours. You can serve a large number of customers if you resort to accepting credit cards.
Credit acceptance system can be created easily using the checking account of your business. You can have the bank help you complete the process. Better still, you can get a merchant account using the same business bank account.
Though you might have to pay some fee for the bank to accept your credit cash payment system, you will eventually enjoy more pros than cons. You will get massive profits and business if you allow your clients to pay for the goods and services using credit cards. Before you start processing the system, get in touch with your financial institution so that they provide you with the nitty-gritty details about such operations.
4. Multiple Account Signers
It is possible to have may account signers on your checking account. This means that you can allow many other people to access the funds on your account.
While you are busy with other aspects of the business, you can have your employee take care of some administrative banking duties. Therefore, you will have more time to focus on the revenue-generating aspects of the company. However, while it is possible to let others use your business bank account, you must limit the number of people who can access your account. You must have a reasonable level of trust in the people you allow to access your business funds.
As a sole proprietor, you will need to get a checking account for your business. Your personal details will be needed when you open this account. This means that whoever has access to your business funds has access to your private information. Trust is a key element for business owners who allow workers to access your business money. Before hiring an expert to do this bit of work for you, make sure you run research on their background information. You should also have their personal information.
The Final Word
Business accounts are crucial in many ways. If you are looking to start a business, you need to have a separate business bank account for it. That way, you will avoid the confusion that is common when filing tax returns. Also, you can easily monitor the progress of your company by looking at the previous earnings and expenses incurred. All this can only happen if you consider having a separate bank account for your company. Note that different banks operate in a varying set of terms and conditions, therefore, before opening a business bank account, you must confirm that they provide services based on the terms and conditions that will service all your business needs.