Should I open a business account for my business?
Having a bank account facilitates many daily activities and provides various benefits. Despite this, many companies do not have an account, considering that they are not reliable, that they are not necessary, or that they are too expensive to maintain. For this reason, we share with you the information you need to break myths, resolve doubts and show you the benefits of opening a business account.
The vast majority of micro, small, and medium-sized entrepreneurs consider it important to separate personal finances from business. For that reason, many specialists began to open separate bank accounts and not use personal credit for the company. However, in practice, entrepreneurs often use their personal credit cards to finance their business or share the same bank account with their company.
For these reasons, a great challenge for SMEs is professionalization, since many entrepreneurs see their business income as family income or assets. In other words, use your business as "petty cash" to finance your expenses. This makes the administration of the company much more complicated and can lead to very costly mistakes.
So the most convenient thing for you and your business is to open a business account.
But first, what is a business account?
Bank accounts are financial products that help manage money. An account is, more precisely, a contract between a client and a bank or entity through which the holder deposits an amount of money and the entity acquires a commitment to guard it, with the assurance that all income and expenses will be recorded.
Therefore, a business account comprises a whole portfolio of services specifically designed to manage a business's money and process its financial transactions.
Types of business accounts
Financial institutions make available to companies and businesses various products that, for the most part, can be classified into the following types of accounts:
Current business account
It allows money to be handled easily, simply, and safely since cash can be made available when required. Current accounts are also known as deposit accounts, and it is the most common type of account for banks since they allow money management such as transfers, payments, and inquiries. They do not offer any type of profitability, since they are not oriented towards savings, but are created to manage the money stored in them. It is common that they are subject to some commissions.
Business account with checkbook
Checking accounts with checking offer easy, everyday access to the money deposited in them, plus they have a checkbook to manage the money. They usually do not require minimum balances, but rather you have to keep enough money in the account to cover purchases. If the money runs out, you must deposit more to continue using them.
Business Savings Account
This type of account is suitable if the primary objective is to find a safe place for the money a business earns. Savings account allow you to generate a small return on the money that is saved in them. As the name suggests, these accounts are meant to save money, so there may be a limit to the number of withdrawals or transfers that can be made in a month, and there is usually a minimum daily balance requirement.
Payroll Business Account
It is a bank account in which an employer deposits the salary and other benefits corresponding to the salary of a worker. It is common for these types of accounts to be exempt from commissions.
Business accounts in dollars
It is a deposit account in which instead of making transfers in local currency, they are made in dollars. Once the money is deposited, it can be used at any time, with the option of using it in dollars or exchanging it for pesos. The plastics associated with dollar accounts are widely accepted worldwide.
Why should you open a business account?
Believe it or not, one of the first things you should do after creating your business is to open a business account. A business bank account will help you keep personal money and business money separate and better control spending, making it easier to track your business finances and save time.
In addition to simplifying your company's accounting, opening a business account gives you more benefits:
A safe place to keep your money
Possibility of obtaining a business loan or a line of credit
Make payments and transfers, including paying taxes
Make the payroll
Possibility of having a checkbook
Have a debit and/or credit card
Opening a business account helps you comply with the law and stay protected. It also offers benefits to your customers and employees.
On top of that, most business bank accounts offer advantages that standard personal accounts don't.
Protection: Business accounts offer security to your business, your customers, and you personally.
Professionalism: Clients will be able to pay with credit and debit cards or write checks to the company and no longer in your name. In addition, you will be able to authorize employees to handle day-to-day banking tasks on behalf of the business.
Prevention: Business bank accounts usually offer the option of a business line of credit, which can be used in an emergency or if the business needs new equipment.
Buying Power: Business accounts help manage, invest in the business, and build your credit history. Business credit is similar to personal credit. Creditors use your credit history to determine how good you are at managing money.
It's easier to keep accurate accounting records: Using the same account for your personal and business expenses is not a good idea, as mixing finances can complicate accounting. It is better to have a business account and use it exclusively for business transactions.
Filing taxes is easy: Preparing your tax return can be a complex process. If you use the same account for your personal expenses and those of your company, it becomes even more complicated. An error in the movements and deductions can mean losses. Using a business account can help you simplify compliance with tax obligations.
How to open a business account?
Some people open their business accounts at the same bank that they use for their personal accounts. Although this may sound very convenient, we recommend you compare the rates, commissions, and benefits offered by various institutions, as well as the requirements that each one asks you to open an account.
Some factors to consider when opening an account for your business are:
Requirements for a business account
Opening a business account is often more difficult than opening a personal account. Before choosing the account for your business, research what documents you will need, who will need to sign, and how many visits you will need to make to the branch.
Commissions and charges of a business account
Accounts may have different fees associated with them, such as a monthly maintenance fee, fees for not maintaining the minimum balance, or fees for making electronic transfers. Read the fine print! It's important to be aware of fees and understand how to manage them to avoid unwanted costs.
Monthly transaction limits
Business bank accounts may charge you fees based on the number of transactions in the account, the number of checks you write, and the number of checks or cash deposited each month. It is better to find an account that meets the needs of your business without having to pay commissions.
There may be different features and services to compare, such as the ability to bank online, use a mobile app, or connect the account to your company's accounting software.
When conducting your search, you should ask enough questions to know if the financial institution offers the services you need. Do not forget to take into account the key factors related to the daily management of the account:
Interest rates on savings and checking
Interest rates on lines of credit
Commissions per transaction
Minimum monthly commissions, which are charged if the company does not cover the minimum monthly balance or the required minimum number of transactions made.
You should know what the minimum balance required is and how much you will have to pay if you have a lower balance; how many free transactions you would have per month and what is the fee for exceeding the limit; how many cash deposits you are allowed per month and all issues related to the requirements of your company.
Each financial institution has different requirements for opening a business account, but in general, they can be expected to require the following:
An initial deposit
A document that corroborates your identity and that of the business
RFC or proof of fiscal situation
Your business license
Associations and societies may be required to provide incorporation documents