With so many new businesses being launched nowadays, it is easy to overlook one key component: a business bank account. Many business owners use their personal savings, checking, and credit cards/loans for business transactions; however, this can very easily lead to the mistake of mixing business transactions (i.e expenses) with personal ones - resulting in accounting challenges, potential tax issues, and other problems. I will go over a few reasons why having a business bank account is both crucial and beneficial for small businesses.
Recordkeeping
Having a business bank account makes it easier to keep accurate and clean records of business transactions. Business bank accounts can be synced to accounting software, such as Quickbooks and Xero. Also, financial institutions provide bank statements to help you keep track of your income and spending. All these features can facilitate the bookkeeping process. Your bookkeeper will be able to better understand your business transactional activity, without having to sift through a mess of personal and business transactions. Having a business bank account can also be crucial in tax matters. In the event of an audit, for example, business owners with business bank accounts can have quicker access to bank records (check copies, receipts, etc) to potentially support information declared on business tax returns. On the contrary, it can be difficult to extrapolate relevant information from a personal account that has mixed personal and business transactions.
Banking - Deposit Accounts
Banks & credit unions offer solutions specific to business owners with deposit accounts. One basic example is having access to merchant solutions. For many business owners, collecting payment from clients can be a hurdle. Many financial institutions offer payment collection solutions, such as a point-of-sale (POS) device, for business account holders. Digging a little deeper, some financial institutions offer in-house payroll systems and ACH transaction capabilities. These are just a few examples. Speak to your banker for more details and fee information.
Banking - Borrowing
Addressing one of the biggest hurdles for small business owners, banks & credit unions provide financing options. Many business owners start their businesses by racking up business debt on their personal credit cards. However, utilizing a business credit card or business line of credit can be an alternative source of funds. One thing to remember is that the deposit account relationship that you have with the financial institution is generally taken into consideration during the underwriting process for business loans. As such, having a business bank account can help build a pathway to getting access to borrowing solutions. Of course, every institution is different - make sure you speak with a banking professional for specifics.
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For more information on these subjects, speak to a qualified financial professional. Aventa Tax LLC provides comprehensive tax & accounting solutions. We are happy to review your specific situation and see how we can be of service - schedule a free consultation today.
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