We often get calls from start-ups who have no idea where to begin with their finances. One of the common mistakes we see are not properly setting up the business and not opening a business checking account. We’ll discuss the business set up later and today will focus on the importance of setting up business checking.
Setting up a separate business account is vital. Tracking income, expense and owner’s draws are a nightmare when mixed in your personal account. This makes understanding if your business is profitable almost impossible. And when your bookkeeper does need to set up your books, it will much more time-consuming (read as costly to you unfortunately). Your best bet is setting up a business account from the get-go. If cost is the deterrent, many banks offer a free account for the first few months and some are completely free. Below are a few we like for the cost:
- Fidelity-Free checking with an opening balance of $50. https://www.lionbank.com/banking/business/checking
- PNC-Free checking with up to 200 items a month and $100 to open.
If you are using their merchant services, some banks such as Wells Fargo (https://www.wellsfargo.com/biz/products/accounts/checking/0 and Bank of America (https://www.bankofamerica.com/smallbusiness/checking-accounts.go waive the fees.
Of course, it might be easier for you to open a bank where you already have accounts even if there is a fee. But the important thing is to open one! It will make your bookkeeping much cleaner even if you don’t engage a bookkeeper until later. Many bookkeeping software such as QuickBooks offer bank download which is a real timesaver. But this only works if your accounts are separate.