[This article was written by Samantha Higgins.]
While it might seem convenient to use a personal bank account for business transactions, it’s important and worthwhile to take the time to open a separate business bank account because it will help keep your business funds separate from personal ones. Intertwining the two can lead to many issues down the line that becomes progressively more difficult to resolve, including but not limited to the inability to track expenses effectively and possible liability concerns. Opening a business bank account can help facilitate bookkeeping, lowering liability, finding possible deductions, and saving money. Should you decide to do so, there are 5 things to consider before opening your business bank account.
One important thing that one has to consider when looking to open a business bank account is the physical location of the bank. Businesses, particularly cash-based ones, for the most part, tend to undertake multiple monthly transactions, meaning you may have to be physically traveling to the bank each day, in some cases multiple times, in order to fulfill them personally. Therefore, taking the time to ensure that the bank of choice for opening a business account is not too far from your company can greatly reduce the time and money wasted on traveling between the two, and therefore lead to greater profitability.
2. Minimum Balance
Another important thing that one has to consider when looking to open a business bank account is the possible minimum balance that would be necessary to maintain every month in the business account in order to avoid paying hefty penalties and other fees down the line. Different banks demand different base balances from the businesses that they may be working with, and as a result, looking for banks that require low minimum base balances or do not charge any additional fees can be helpful for those whose business finances are prone to large and sudden ups and downs every month.
3. Low Fees
Another important thing that one has to consider when looking to open a business bank account is how low the fees involved are. Although the business bank with which you are seeking to open an account should give you the relevant financial information upfront prior to opening the business account, it is recommended that you request a complete fee schedule from every bank you are considering so that you may carefully compare the fees and rates that each one can offer you. Accounts with lower fees may be better for retailers guarding against bounced checks, whereas extra fees from currency conversion should be avoided for business with international customers.
4. Online Services
Another important thing that one has to consider when looking to open a business bank account is whether and how well online banking services are integrated with the business checking account you may be looking to open, and if so, what specifically they include and at what price. While most banks do provide customers online services and let them check things like transfers, transactions, and balances as a given, some banks, in particular, let you do all of these online simultaneously and in a streamlined fashion among different accounts and with no extra fees involved.
5. Cash Limits
The final but no less important thing that one has to consider when looking to open a business bank account is whether or not the bank has any limits upon cash-based transactions and deposits, as some do in order to avoid storage and inventory inconveniences. Hence, certain entities such as retailers or restaurants with large numbers of customers who pay in cash could benefit from opening a business bank account with a bank that accepts greater quantities of deposited cash or a credit card so that they would never have to worry about exceeding their cash deposit limit and wasting time and possibly money having to resolve the issue down the line. These will be different depending on your location, for example, if you live in Nebraska and are opening an Omaha credit card there might be different restrictions when traveling out of the state or country.
Opening a business bank account can greatly benefit any business owner. Nonetheless, in order to get the most possible bang out of your buck, following several steps such as identifying the most suitable account type, choosing the best bank, being familiar with the involved fees and rates, having the necessary documents prepared beforehand, and learning how to properly maintain a business bank account after it has been set up will altogether lead to more financial success and security in the long run.