People who run a small business activity are often forced to deal with an apparently minimal but yet critical dilemma: using their personal bank account as a reference point for their business, or opening a specifically dedicated account for it? This could appear as a meaningless issue, but it could actually affect our business in a nothing but negligible way.
In general terms, keeping our business bills apart from our personal or familiar ones is the most practical solution, and the reason is quite easy to understand. Having two separate accounts allows us to avoid any kind of blending between two financial circuits that shouldn’t be confused with one another. Like the lone star bank, most financial institutions offer personal and business accounts which will make separating your accounts a lot easier.
Opt for a Dedicated Business Account
Income and expenses of a business activity have to be defined in the most accurate and precise way, and the only mean to obtain that is to allocate all the financial transactions regarding our business area inside a specific account. Therefore, a dedicated business account is the way to go.
Here’s why you should use a dedicated business account:
Obtain funding and loans easier
For a startup looking for a venture capital or any other form of initial financing, having a dedicated account is often a mandatory condition. It makes a company more reliable in the presence of any kind of possible investor and/or partner. But that is not all: every bank has specific conditions for new investors and/or business front-runners, and opening an account for an activity allows its holder to have access to all those facilities.
Even obtaining credit lines from banks is easier through a specific account. This is due to a distinctive policy that many credit institutions adopt towards new investors.
In order to attract them, banks offer favorable conditions and very low long-term interest rates, so that a new company and/or business activity can easily manage the initial inertia until the first meaningful profits start to come.
Security and awareness
Security and awareness are the last – but not the least – reasons why a dedicated account is an appropriate solution for every kind of business sector. Besides the fact of having a constant and detailed overview of the company’s financial situation, there is at least another vantage point: holder’s business is continuously monitored by professionals, and its health status could never go beyond their control. This means that, if something goes wrong, holders have the time (and the instruments as well) to rectify their investments policy before it’s too late.
Besides that, a business account is generally more private and protected than a personal account, which is often more exposed or even shared (for example if it’s a family account). Violating or hacking this kind of accounts is almost impossible, even though financial piracy is always looking for new tools to access them.
Takeaway
In summary, we can state with a considerable amount of certainty that personal and business bank accounts are made to be apart. They follow different rules and, most of all, they are subject to different control protocols.
Notably, a personal account is related to an individual’s responsibility, while a company and/or business account is often related to a multiple series of responsibilities (even though not everyone at the same level), and its efficiency can affect more than one individual.
It implies automatically that a business bank account is not just a matter of income and expenses, like an ordinary household budget. It is also about resources and budget management: concepts that only a skilled manager is able to handle properly.