Small business bank accounts are designed to provide benefits that go beyond the needs of daily operations and help you strategically long-term. No matter the size of your business, there are significant advantages to opening a business account.
Although business and personal accounts may seem to serve the same purpose and therefore be interchangeable, subtle differences in design and purpose can leave a big impact on your business operations and save you time and money in the long run.
Whether you’ve been the owner of a small business for a long time, operating out of your personal bank account and starting to think that it’s time to switch, or if you’re just starting up your e-commerce business and not sure what type of account to use–this post will help. In this post, we explore the advantages of using a business bank account for your e-commerce business, including the telltale signs that it might be time to switch.
Increase Your Professionalism
With a business bank account, you can place your company’s name and information on transactions and checks. When a client sees an incoming wire transfer with your company’s name on it, it gives the transaction certain credibility that doesn’t exist when you use your personal information. This is especially true when working with supplies and vendors.
By representing your company with its name and information you are setting yourself up to be taken seriously and seen as professional. This also puts you in a better position to negotiate, as you’ll be seen as a credible business owner.
Separate Business and Personal Expenses
Separating business and personal expenses is key for several reasons, especially to establish credit for your business. By tracking your business expenses independently from any personal expenses it becomes easy to rapidly determine how much money you make, what you spend it on, and how financially stable your business is.
Good business credit is critical if your business ever requires financing. Prospective lenders will want to understand what cash flow looks like in your business - not in your personal finances.
If your personal and business finances are intertwined you have no way to establish credit as a business, and as a result will likely have a very challenging time getting a loan. Opening a business bank account will allow you to avoid this situation and increase the ease with which you are able to access a loan. It will also make tax season significantly less stressful for you, or your accountant.
Take the Stress Away from Tax Season
Imagine: you’re attempting to claim deductions for company costs, but because you have merged accounts tons of qualifying purchases and expenses have been lost in the multitude of transactions you have every day.
As mentioned previously, by separating your personal and business bank accounts, transactions qualifying for a refund for your business become easily identifiable. In the long run not only will you be able to make your claims more easily (and likely get refunds!), but you will also save time and money spent on paying an accountant hourly.
Indicators it’s Time to Switch
The best time to switch your e-commerce business from a personal bank account to a business bank account is when you first start your company. The second best time is as soon as possible.
It doesn’t always happen that way though, and that’s okay. If you’ve started your e-commerce business with your personal bank account and are wondering when is the right time to make the switch, here are three signs that you might be overdue:
Your business is growing and you’re looking at financing options
You’re getting hit with fees from your personal bank due to transfers
You’re starting to feel limited by your account, especially in terms of cash flow
The number of transactions you’re making is increasing
If you or your business is experiencing any of the above, it might be time to switch to a business bank account and get the support you need. We know that the switch can be daunting, so consider reaching out to one of our trusted partners, like Viably.
Regardless of where you choose, make sure your bank meets the needs of your business and can give you the support necessary to help your business grow and thrive.
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