Advantages of Having Separate Business Bank Account

Benefits of Having Separate Bank Account for Business

While you definitely take care of our financial priorities, one thing that most start up entrepreneurs often miss upon is setting up a dedicated bank account for their business purposes, solely. This is one of the basics of owning and operating a business, often overlooked by mingling personal and business funds. Mingling of these two separate types of funds is most commonly witnessed in case of self employed sole proprietors and multi level marketing people.

In a bid to keep bank fees and expenses low, many business owners seldom carry business transactions via their personal accounts. In case you are among such people who don’t actually keep personal and business account segregated, here are some advantages of having separate business bank account that can save your business from a host of problems which can be caused from mingling of personal and enterprise funds:

1. Appropriate Recording Of Business Transactions

With a dedicated business checking account, your small business records can be kept organised. You get the opportunity to have instant summary of your business transactions and keep a record of the well being of your enterprise, which is otherwise difficult if the record gets mixed with personal transactions.

You can easily monitor your business’ profitability as your business’ income and expenses are properly recorded without inclusion of personal expenditure or revenue. Moreover, if you incur your business expenses via your personal account, you will have a tough time explaining taxation authorities during audit that you are operating a business, which they would now consider a hobby.

2. Accurate Determination Of Taxes & Deductions

The busiest time of the year when you have to file the income tax, you will find yourself in jeopardy while separating your personal transactions from business transactions. Having a separate business bank account helps you to file taxes accurately as you can easily get a detailed view of your business account statement and record right figures while filing income tax. Inaccuracies in taxation filing process can even attract heavy penalties and affect the business’ market reputation.

Coming to deductions, it is extremely easy to deduct business expenses from tax return when maintained a separate business checking account. Your business account statement can clearly determine the deductions you are entitled to while saving you from the hodgepodge created by co-mingling business and personal transactions.

3. Transparent Audit Trail

While the government does not mandate a specific book keeping method or having a separate bank account, all it requires is that all records are up to date, accurate, permanent and depict a clear picture of income and deductions. One of the biggest advantages of having a separate business bank account provides a detailed statement supporting this requirement of the government, hence providing transparency in audit trail.

4. Credit Cards Can Be Accepted

When you accept cash payments only in this age of advanced banking, you tend to limit your customer pool. Since many customers today prefer making payments via credit cards, accepting credit cards by businesses can help them enlarge their customer pool.

With a dedicated business bank account, enterprises can set up a credit acceptance system tied up through the bank. Banks however, may charge extra for processing car payments, but technically, the income generated by accepting card payments surely makes such petty expenditure feasible.

4. Allocation Of Multiple Business Account Signers Possible

Unlike personal bank accounts, business bank accounts support multiple signers, which imply that you can allow an employee to take care of the administrative banking duties while you can utilise that time to focus on other income generating business activities. However, one has to be very careful while sharing sensitive bank account details to others.

6. Business Acquires Professional Stance & Market Goodwill

Looking professional is the key to attract more trust from your customers as well as investors. If you issue cheques to your vendors in your personal name or ask your customers to issue payments to your personal bank account, you as a proprietor of your business are not creating a professional image for your enterprise. Even if your business is carried on from home or part time basis, ensure to create a brand image that can earn goodwill for you and improve your popularity and acceptance in the market.

You may like this

• 6 Best Methods for Money Saving
• 5 Innovative Ways To Utilise Your Business Loan Efficiently
• 10 Practical Ways To Become A Millionaire By The Age Of 30