Business owners can attest to the unending solicitation they receive regarding new business accounts from various financial institutions. These institutions continue to come up with attention-grabbing perks that include better interest rates, lower fees and wise investment of your money, according to www.hackeraccounting.com.
With so many banks coming at you at once, it can be difficult to know which one to choose. But do you need to choose just one? Can you have multiple business accounts at more than one bank? How does this help and what are some of the risks?
Pros of having multiple accounts
Organisation: Some businesses have found that having multiple accounts can actually help them stay better organised when it comes to management of funds. For instance, having a separate account that is primarily for payroll can help to keep things under control and clear for bookkeepers. It may be helpful to have a separate account for large business expenditures or for sales reps that may be using allocated funds for entertaining potential clients.
Better interest: Business owners are always eager to find ways to bring in more money or to put their savings to work for the business. Having multiple accounts allows you to keep your options open when it comes to managing your investments and savings.
Keep things spread out: Another major reason for having more than one business account is to allow yourself to have access to your money from various locations rather than having it all tied up in one account. Sometimes having all of your eggs in one basket can become a major hindrance. Keeping your capital diversified gives you more access to it when necessary.
Cons of multiple accounts
Management difficult: Perhaps the biggest downside to having multiple business bank accounts is that it can become an overwhelming task to stay on top of all of the accounts at once. Do you have a small business without a dedicated accountant? You may find that you run yourself crazy trying to keep track of passwords and calculations.
Minimum deposits: Are you considering opening more than one account? Think about how much money you will have available to deposit in each account. Many business accounts require a minimum balance in order to waive any account fees. If you find that you typically only have a minimal amount of money left over month to month, multiple accounts may not be the solution for you.
Managing multiple accounts
While it is essential to have a business bank account, it actually may be smarter to have more than one account, according to www.bizjournals.com.
There are many reasons for this, including security concerns and having the ability to track expenses. Setting up a second account can also be an opportunity to change banks, which might be a good idea if you can get a better deal with a different business banking provider.
If you are not convinced that you need more than one business bank account, read on.
- Sometimes the money in your account is not really yours
Your bank account might seem flush right now, but how much of it is reserved to cover quarterly taxes, invoices that you will soon need to pay, or payroll? It can be easy to take money out of the account, feeling like your business is doing really well, only to find you don’t have enough funds to cover these critical expenses when the need arises.
Having a separate account — an interest-bearing savings account is a good idea here — can help you make sure you always have enough to cover your expenses. If you have contractors working for you on projects, as soon as you get paid on an invoice, set aside what you will have to pay them for that work. Also save about 20 per cent of your profit to pay your taxes so you are not scrambling to pay a hefty bill.
It may take some practice to get into the habit of setting money aside long before you need it, but it will keep your cash flowing. After all, issues with cash flow is one of the top reasons businesses fail, so set yourself up for success with this financially healthy practice of saving money. And it can’t hurt to set up payroll software that handles taxes and makes all expenses clear ahead of time.
- Different accounts serve different needs
Your money serves different functions: There is the money you bring in, the money that goes out to pay the bills, and the money you set aside for a rainy day or to expand your business down the road. Lumping it all together into one account can make it difficult to have visibility into what is what.
A solution here is to have one account for receiving payments and another for paying expenses. In addition, you can have a savings account for the future. This makes it easier to track expenses as well as observe revenue trends, which is all useful data when it comes to updating your business growth strategy .
This is a big one. While the chance is low, there is a possibility of someone hacking your bank account to use it to pay for things. A person with your routing and account numbers to charge your account can pose a risk.
One thing to note: all the information someone needs to attempt to pay bills with your account is found on every cheque you write. Horrifying, isn’t it? But if you use your bank’s billpay system, this information is not included, so your account data is protected.
Ask your bank about setting up protections on your account, such as limiting withdrawals or flagging unusual transactions. This will at least notify you immediately of any suspicious activity before it drains your account.
Setting up multiple bank accounts is easy, and this tiny effort can end up saving you in a major way. Consider what the flow of money looks like for you: Maybe you want all payments to go through platform, and then you transfer those funds over to your bank account elsewhere that you use to pay the bills. Having a savings account for money you don’t need right away is a smart idea so that you have got funds should an emergency or opportunity arise in the future.
Above all, keep an eye on your accounts. Not only do you want to be aware of any potential fraudulent charges, but you also need to keep tabs on where your money is going and what your expenses look like.
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