5 Bank Accounts Every Small Business Should Have

It is very essential for small business owners to have a banking relationship with a bank (or several banks). In the world of PayPal, Stripe, and Square, many businesses most small businesses assume a virtual terminal is the only method they need. A virtual terminal is a web-based application that allows you to process electronic payments without using hardware as you would with a traditional POS system. Here are the benefits of business banking accounts:

  • Separation from your personal funds. Co-mingling your business and personal funds negatively affects your business and increases your risk of personal asset exposure. 

  • Accurate and organized financial information for tax reporting, applying for grants, loans, or attracting investors. 

  • Increased approval for business financing. 

  • Official presence of your business operating in a professional and legal manner. 

A good rule of thumb is to have a banking relationship with the following banking institutions:

  1. A large corporate bank - these banks often have nationwide ad international banking centers and large financing options. 

  2. A local community bank - these banks are well known in their region and provide personalized service. 

  3. A credit union - these banks often provide the best interest rates and allow their members to have a voice. 

 

Below are just some of the Business accounts that every business: 

1. Business Checking Account

The business checking account is the primary operating account for the business. This account tracks total income and total expenses. 

 

2. Payroll Account

This account is ideal if you have a large employee base. This account. This account covers salaries, payroll tax liabilities, and employee contributions. 

 

3. Inventory Account

This account is great for product-based businesses who need to purchase inventory frequently. You never want to run out of cash for inventory, especially if you run a high volume store.

 

4. Business Savings

 

This savings account helps you prepare for long-term investing, to build up cash reserves, and the development of your company. Ideally, you want to invest 10-15% of net profit into this account monthly. 

5. Tax Savings

 

A tax savings account is needed to help anticipate tax payments. Ideally, you want to save 25% - 35% of net profit from the operating account. Your CPA and Financial Advisor will allocate funds from this account to help reduce your taxable income while also helping you save for retirement, invest in your children’s 529 or custodial accounts, etc.

 

Features to Inquire About

Here’s what to look for when shopping around for a business account:

  1. Federal Deposit Insurance Corporation (FDIC) insured accounts. 

  2. Access to a business banker locally or via phone. You need someone you can connect to when you’re having a crisis or need immediate attention. 

  3. Low monthly account fees. 

  4. Mobile check deposit feature. 

  5. Access to fee-free ATM withdrawals network.

  6. Incoming and domestic wires transfer. 

  7. Monthly minimum balance requirement. 

  8. Bill pay feature. 

  9. API integration with your other operating systems.

  10. Mobile banking app. 

  11. Read-only access to your accountant or other employees. 

  12. % Cashback on debit purchases. 

  13. Merchant service account. 

  14. Business financing opportunities.

 

Remember, every dollar counts. 

 

CFO for Women

www.cfoforwomen.com 

We help women-owned enterprises improve their decision-making and boost their bottom line.

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