Business Banking 101: The Foundations of Financial Success
The way you handle your business’s finances matters a great deal in its future success.
Neglecting or mismanaging key elements of your venture’s financial health, such as your business’s banking account, can translate to unfavorable financial outcomes for your business.
In contrast, making the most of the banking features of your partnered financial institution can make your business objectives much more easy to achieve.
In today’s article, we’ll equip you with the information you need to know about setting up a business banking account. Furthermore, we’ll also give you some tips to help ensure that your future banking transactions will be positive experiences.
Why Get a Business Banking Account?
You’re highly encouraged to get a business bank account for your venture, no matter how far along you are in your business.
It’s not merely a matter of convenience. The amount of features and benefits business owners and entrepreneurs can get from separating their personal bank account from their business bank account is numerous.
Here are a few benefits of securing a business banking account:
It helps protect your property against liabilities: Owning a business account can reduce the risk of your personal assets getting seized in a lawsuit.
It streamlines tax filing: Determining tax-deductible transactions is made much easier with a separate business bank account.
Your business gets exclusive perks: Some banks, for instance, provide business owners the ability to charge customers with a credit card, allowing for more convenient transactions.
Your business looks more legitimate: When you send an invoice or make reports, having an actual, registered business name gives third parties peace of mind knowing that they’re dealing with a professional and licensed entity.
You can scale your business: You can grant employees varying levels of access to your business account, reducing your workload and making it easier for you to focus on the bigger picture.
You can request for larger loans: You become more credible upon owning the rights to a business bank account. If the cash flow is good, then it’ll be easier for you to obtain a larger lump-sum loan or more favorable interest rates.
The pros of owning a business banking account are not to be taken for granted. As soon as you kick start operations in your business, be sure to establish a bank account for it immediately to get the ball rolling.
What Do You Need to Open a Business Banking Account?
Are you already in the process of opening a business? It’s best to be prepared. Banks in Australia and other parts of the world typically require copies of documents before they offer you a business account.
The first thing you’ll have to do is to pick a bank provider. Be sure to research what accounts your local financial institutions offer, as well as the features and fees that come along with said accounts.
Also, be mindful of the bank’s reputation and customer support channels. You’d want to forge a proper relationship with the bank, so if you can keep in contact with a manager, that’d be even better.
Once you’ve picked a bank, it’s finally time to enter the more grueling phase of setting your account up. This is when your documents will come in handy. Banks typically request applicants to send copies of the following:
Taxpayer identification numbers
Registration number and business certificate
An ID card like a driver’s license
Proof of your business address
Depending on the bank and the nature of your business, you may be required to submit additional documents. Once you’ve gathered all these documents, submit them and apply for your business account of choice.
You can apply on-site in your chosen bank. Some banks also allow you to send an application online.
The application form is designed to provide the bank with a clearer understanding of the nature of your business. It’ll typically look for your venture’s revenue projections, past costs, the number of employees, expected usage of the account, and so on.
Once you’ve submitted all the documents and the application form, you’ll have to wait for the bank to process your documents and profile. They’ll send a decision on your application in the next few days.
The 6 Different Types of Business Banking Accounts
Setting up a business banking account can be daunting. That said, setting one up successfully, only to find out that it’s not the right one for your needs, can be even more excruciating.
Hence, it’s important to be aware of the different types of business banking accounts you can avail of.
Here are six types that you may come across when you’re searching for potential account types:
Business checking account: A business-only variant of a personal checking account. It’s typically used for daily operations, such as depositing revenues, paying bills, and managing payroll.
Business savings account: Mostly used for storing business capital to be used at a later time. Comes with interest income.
Merchant account: This grants businesses the opportunity to accept credit and debit card payments, processed first-hand by the bank.
Foreign currency account: This account accepts and holds foreign currencies, which is useful for those with international clients or businesses operating on foreign soil.
Credit card account: This account helps businesses access a line of credit. It also comes with rewards such as a higher credit limit or additional travel perks.
Business certificate of deposits accounts: Ideal for businesses that have surplus funds, business CD deposits gain larger interest income at the cost of not being able to easily withdraw their funds.
How To Choose The Best Business Account Provider?
With many banks and financial institutions that the average Australian business owner can access, it can be overwhelming to pick the best business account provider.
However, there are ways you can sift through the exaggerated promotional material and figure out the right business account for your needs.
Here are things to consider when selecting your business account provider:
Competitive interest rates: The higher the interest rates, the better your capital will be to earn a little bit and hedge against inflation. This applies to savings and time deposit accounts.
Bank account types: If you’re looking for only a specific banking account type, such as a merchant account, then you’ll only need to focus on banks that offer this scheme.
Online banking access: Let’s face it, it’s troublesome going all the way to the bank just to address a concern. The more robust a bank’s online communication features are, the better and more convenient for you.
ATM and branch accessibility: If there’s little difference between two certain banks, choose the one that’s easily accessible and within easy access to you.
Current reviews: Get a good grasp of customer sentiment before choosing a banking account provider in dedicated review sites. These customers know first-hand the quality of their bank’s offerings.
Banking fees: Look at transaction fees, monthly fees, and ATM fees and choose the most competitive rates. Furthermore, look for a banking account type that has the most reasonable minimum deposit figure.
Customer service: You don’t want to be dealing with an AI Chatbot every time you have a concern. If given the choice, choose a bank that allows you to build a relationship with a manager—this way, you won’t be left scratching your head when you have to make an eventual inquiry.
We hope these financial tips will help you in your entrepreneurship journey. Happy hustling!