Handling the financial side of your business is key to having a successful enterprise. That is why, it is crucial that you properly handle the ins and outs of the company, especially the accounting side of it. If you are misled into thinking that you are going over when, in fact, you are going under, you are losing a lot of opportunities for the short and long terms.
Many startups fail to focus on many aspects of the business as they usually put the emphasis on the product or service offered. While it is correct that a company must offer the best products or services to thrive, other aspects of the enterprise are also essential to make it work. One crucial aspect is accounting because it acts as the cement that makes all the other departments stick together. Without it, the very foundations of the business will fall apart.
Because startups do not usually think of other departments except for the product or service offered, legalities are also not put into the account, as well. It is not uncommon for starting businesses to have their personal and business accounts placed into one account. Owners may think it is out of convenience since you only have to manage just one account. However, in the long run, doing so proves to be detrimental to your business’ finances.
It may be time-consuming to build a separate business bank account, but it is a worthy investment in the long run. You will see that the rewards far outweigh the costs.
Here are some of the advantages of having a business bank account:
1. You need a business account to keep your personal and business expenses separate
Having a business account is essential to keep your personal and business expenses and income separate. If you keep these accounts together, you may not know the real picture behind your enterprise. You may think that you are still okay with your business. But, in fact, you are already going under.
Make sure that you have separate accounts because if you don’t do this, you may end up being blinded by the reality of your business. It is difficult to know what to do with your marketing and operations, if you are not sure of how much your income and expenses are. So, it is always best to be in the loop of what’s happening.
Proper bookkeeping is crucial, especially if you have taken a loan for your business. The loaners and the bank will, for sure, ask for regular updates on your business. Having these in place, can enable you to outsource your CFO services. Therefore, you must always be ready for these surprise checks, and whenever you need to show your accounts to people whom you are accountable to.
2. You need a business account to keep your credibility as an owner
How can you gain the trust of clients if your accounting is messy in the first place, right? Also, how can you gain the confidence of banks and loaners if you have lousy accounting practices?
To develop your brand, you have to make sure that people will trust you inside and out. One of the things that can further cement your integrity is doing proper accounting because by doing so, you show that you are transparent and honest with the ins and outs of your business. You cannot expect clients, banks, and loaners to trust you if you are not open to your accounting practices.
You may think that you are doing the right thing, but if you don’t have the proper training for it, then you may be doing accounting practices that are out of the industry standard. And remember, accounting is black and white. There are no gray areas or in-betweens with accounting because it is clear to see which is right and wrong, or which is credit and debit. So, regarding increasing your brand integrity, make sure that you show this both internally and externally.
3. You need a business account for legal reasons
Having a business account is essential because it shelters you from legal issues should conflicts arise. If you have a business account and problems arise, your business account will be the first account (and in some states and countries, the only account) to be checked by tax authorities. If you infuse your personal and business accounts together, you put in danger your account, which may also be affected should problems arise.
If you have a business account, you protect your funds in these conflicting cases. In some countries, like the Philippines, if you are registered as a corporation, there is no way for the government to check any account registered under your name. Should you have problems, your business accounts will be the only ones affected and reviewed.
Any entrepreneur would want his/her business to be protected both for the short and long-term. Therefore, having a business account separate from your funds is the first step to giving you the shelter that you need.