Business owners should keep their personal and business finances separate and businesses should be kept separate from personal finances.
There are different types of businesses, and each type requires different kinds of banking services.
A business owner needs to know how to set up multiple business bank accounts.
Separating personal and business money is important so that there aren't any conflicts of interest.
The following article will help you decide if having multiple business bank accounts is right for your business.
It will also show you what kind of business bank account setup works best for your business.
Why have multiple business bank accounts?
Having a dedicated business checking account is one way to manage cash flow, identify expenses, and reinforce liability protections.
Separating certain expenses makes it easier to track them at tax time. Paying quarterly estimates tax may require opening several checking accounts.
Businesses that pay monthly may benefit from having a single checking account. Businesses should always have healthy cash reserves.
A business money market account or a business CD lets them earn interest on their cash.
They also give businesses flexibility when it comes to looking at a certain rate. Many banks offer shorter terms than a year.
Saving for different goals makes sense. You should put money away for specific needs.
Your bank may offer features that allow you to save for different goals.
Benefits of multiple Business Accounts
Having multiple business bank accounts helps you manage your money more efficiently. You can easily see where all the money goes.
This allows you to make better decisions about spending.
Here's some benefits:
Keeping money separated
Having an account for operating expenses allows you to separate capital expenditures from daily costs.
You can then identify if there are any seasonal factors that affect your company.
These factors could be seasonal or time-based. For example, certain months might see a decline in sales because of bad weather.
If this happens, you'll want to adjust your budget accordingly.
You can use a spreadsheet to track your expenses. The spreadsheet can include columns for date, category (such as rent), amount, and description. You can create reports based on these categories.
Identifying income sources
If you're running a small business, you may not have enough information to file taxes. Having a business bank account gives you access to financial statements. You can get detailed information about your revenue and expenses.
Managing cash flow
If you run a service-oriented business, you need to ensure that customers receive payment promptly. Having a business checking account lets you deposit checks quickly. This reduces the risk of bounced checks.
A business checking account gives you the option to open a business credit card. This protects your business against fraud.
Inbound and outbound transactions must be tracked separately. Separate accounts help you manage your money better. Matching account features with the purpose helps you spend money more efficiently.
Protect your money
You should spread your money across multiple accounts to prevent fraud. For example, in the US, FDIC insurance only protects up to $250k per account. Split your money into multiple accounts to increase safety nets for your business.
This also has the benefit of spreading out where money is located, so in cases of hacking, theft, or identity theft, penetration of one of your bank accounts is usually silo'd to that account while your other accounts stay active.
Open a Secondary Virtual Business Account
Are you interested in seeing how a second business account can help your business?
Open a virtual business account with Statrys and you'll get a true Hong Kong account that's completely accessible online.
That means no matter where you are in the world, you'll always have access to one of the world's more crucial financial hubs.
Statrys accounts offer a multi-currency experience with 11 major currencies all in one account.
You can also protect your transactions and payments from currency exchange rate fluctuations by using Statrys to book forward contracts which set a price that you prefer for exchange rates.
You can even expand your account with another virtual IBAN account to make the most of your EU business payments.
How to set up multiple business bank accounts
With a business checking account, you can write checks. You can also transfer funds between accounts. You can also make deposits.
This is the bare minimum for a business account, but to expand your business options, you can open up more accounts with the same institution, or open another account with
To start, you'll need to apply online at your bank.
Once approved, you'll be able to view your available options, or be able to get in touch with someone who can help you open up more accounts for your business.
Alternatively, you can even choose a different bank entirely to run other accounts.
Here's some other bank account types you can try to open.
- An operating account is used for day-to-day operations. It's typically used for payroll, bills, and general accounting.
- A business checking account is used for writing checks, depositing checks, transferring funds, etc.
- A tax account is used for filing taxes. A business tax account is typically used by sole proprietorships and partnerships.
- A profit account is used for tracking profits and losses. Typically, it's used by larger corporations.
Check out this article so you know what types of banks offer services beyond account types.
What to watch for with multiple business bank accounts
As mentioned above, there are several benefits to opening multiple business bank accounts.
However, there are also risks associated with this. Here are some things to consider:
Multiple accounts mean multiple passwords.
Each time you log into a new account, you'll have to create a password.
This means that if any of your accounts gets compromised, then all of them will be vulnerable.
To avoid this, use unique passwords for each account.
Each time you log in, you're exposed to phishing scams.
If you receive an email claiming to come from your bank, don't click on links or download attachments.
Instead, call your bank directly to verify authenticity.
If you lose access to your account information, you could lose access to your entire business.
Your business may not qualify for certain services.
Some banks offer special services for businesses, such as bill payment processing, expense management, and others.
These services might require additional fees.
You'll need to keep track of which account belongs to what.
Keeping track of which account belongs with which transaction can become difficult when you have multiple accounts.
If you want to know exactly how much money is in your business bank account, you'll need to keep track.
You'll need to monitor your balance frequently.
This isn't always easy. Many people forget about their balances until they've overdrawn their accounts.
When this happens, you'll need to pay extra fees.
You'll have to maintain separate records.
When you have multiple accounts, you'll need to maintain separate records for each one.
For example, you'll need to record transactions separately for each account.
The best way to manage multiple business bank accounts is to set up automatic transfers between the accounts.
This ensures that you never miss out on payments and that you only spend money when you have enough cash in your business bank account.
Should You Open Multiple Business Bank Accounts?
There are many reasons why you should open multiple business bank accounts.
The main reason is so that you can keep track of your finances more easily.
Having multiple accounts allows you to keep tabs on everything, even if you aren't at home.
Another benefit is that having multiple accounts makes it easier to transfer money between different types of accounts.
It's important to remember that you shouldn't mix personal and business accounts.
Doing so can lead to identity theft.
Another thing to keep in mind is that if your business has multiple accounts, then you won't be able to take advantage of every service offered by your bank.
Some banks offer special services for small businesses, but these services might require additional fees or other restrictions.
In addition, you'll need to make sure that you're keeping track of which account belongs where.
This is especially true if you plan to do business online.
Online banking systems allow you to link your business bank account to your personal bank account, making it easier to move funds around.
Having multiple business bank accounts isn't a bad idea. However, there are some things to consider before opening them.
First, make sure that you understand all of the benefits and drawbacks associated with doing so.
Then, decide whether or not it would be beneficial for your business.
To be frank, though, it's generally a good idea if you have goals in mind or many cashflows that need to be properly managed instead of all of them flooding into one account.
Are you looking to open your next business bank account?
Get started with Statrys and open a business account in Hong Kong completely remotely and easily managed online.