The Benefits of Setting Up a Bank Account for Your New Business

When you're starting a new business, one of the most neglected actions is opening a bank account.

There are several benefits to setting up a bank account specifically for your business. In this blog post, we'll discuss the benefits of separating your business and personal finances, and we'll also outline what you should look for when opening a business bank account.

Separating business finances and personal finances has several major benefits:

• It’s easier to keep track of profits and losses - seeing how much money is left in your business account at the end of the month can give you a clear view as to how much money you made and help you keep track of your business
• It helps you prepare for tax season - know which expenses you are going to deduct in advance by paying them out of your business account and avoid going through mountains of receipts (those you can find) at the end of March.
• Know how much you’re getting paid - by seeing how much money you are moving into your personal account you can find out your real “salary” in the new business.

When dealing with business finances, banks will try to throw you off with terms like P&L, ACH, wire transfer, and more. But what do they actually mean?

• P&L - Profit and Loss: it’s a document showing how much money you made or lost: you detail your revenue (money that came in from sold goods and services), expanses (every cost the business had), and the profit/loss is calculated as the revenue minus the expenses.
• Cash flow - a cash flow shows how much money came into and out of the business. When starting out your P&L and cash flow will be very similar, with the main difference being that cash flow will show financing activities like a loan coming in.
• ACH - an ACH is a type of bank transfer: an ACH credit is a transfer when money is added to your account and a debit is when money is removed from your account. An ACH transfer usually takes 1-3 business days.
• Wire transfer - a wire is a faster form of bank transfer that takes no more than a day and is usually a lot more expensive to make.

Ok, so now you know why you should open a business bank account, and what you’ll be asked, what should you look for in a bank account?

• Monthly fees - some banks will charge you a monthly fee just for having an account with them, don’t agree - there are plenty of banks out there with no monthly fees
• Transfers and deposits - businesses make a lot of transactions every month so look for a bank with free or inexpensive transfer fees.
• Support - things can go wrong sometimes, so look for a bank that will offer good support around the clock. When a check doesn’t clear, you want to be able to talk to someone fast.

Opening a business bank account can seem complicated and unnecessary but it can actually make your life as a business owner a lot easier. In addition, picking the right bank for you can end up saving you thousands of dollars over the life of the business.