About 27% of small business owners use their personal bank accounts to process transactions. There are several reasons why using personal instead of multiple business bank accounts is a bad idea. Besides the financial risks, you’ll encounter bookkeeping, fundraising, and legal problems. We’ve highlighted the benefits of having several business bank accounts and which types you’ll need.
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Improves your bookkeeping
Every business has to deal with incoming and outgoing transactions, like regular costs, unexpected costs, and taxes. Putting these transactions in different accounts gives you a clear picture of your finances. Having separate balance sheets makes budgeting easier and makes it easier to keep track of long-term goals and trends.
Try using one account for payroll, a second for invoice payments received, and a third for regular office expenses. You can match the account’s features to the purpose of the money. For example, you might want a high-interest savings account to build up an emergency fund for your business. A low-minimum balance account is excellent for your overhead costs avoiding fees when your balance is low.
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Protects and insures your Funds
When it comes to the safety of your finances, you must take enough precautions. If one account is compromised, having your money dispersed across several will shield you from irreversible loss. In countries like the US, bank deposit insurance only covers up to $250,000 per eligible business account. Therefore, large sums of money distributed across multiple accounts will have a higher level of protection. Be sure to open business accounts in institutions insured by a governing body in your country. Then divide your funds to ensure complete financial security.
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Helps you monitor your business
Having separate expense balance sheets can help you split capital expenditures from day-to-day costs. This approach lets you know how your business is doing and which operating costs are worth taking on.
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Extra benefits
Different accounts have different benefits, so look for those that will help your company the most. For example, if you need cash immediately, go for accounts that will cover your ATM fees. If you want to make as much money as possible to keep up with inflation, go for those with high-interest rates.
Types of bank accounts for Businesses
To help you manage small business finances, we recommend opening a checking, money market, and high-yield savings account.
- Checkings
A checking account lets business owners withdraw and deposit funds quickly and easily without incurring high fees. It’s at the top of our list because it’s the most important account for a business owner.
Consider your company’s requirements and match your goals and constraints to the bank account. We recommend choosing banks or credit unions with low to no monthly maintenance fees and high-interest rates.
- Money Markets
The best money market accounts (MMA) help business owners grow and save capital. Use it to save money for short-term goals or upcoming expenses. MMAs are more flexible than savings accounts by offering perks such as check-writing privileges or debit cards. Open an MMA with a competitive interest rate to maximize your savings. Some MMAs include huge benefits like remote deposit and free bill pay.
- High-yield Savings
A high-yield savings account is great for businesses building an emergency cash reserve. Remember that the best rates are usually found at digital banks. But consider their maintenance fees, balance requirements, and other hidden fees. We recommend having your savings and checking accounts at the same bank to make transfers more accessible.
Final Thoughts
Multiple bank accounts help you stay organized, provide security, and position you for financial success. Your objectives and the situation determine the best account types you’ll need. If you need help figuring out where to begin, your bank can assist you. After all, your company’s success should be their top priority.
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