As a small business owner, you have a lot on your plate, and without good processes in place, it’s possible to make mistakes that could end up costing you.
Managing your bank account is an area where it’s crucial that you stay on top of your game. If you make a mistake, it could be detrimental to your business and your goals. Here are five business banking mistakes that can be costly for small business owners in terms of both money and time.
Using a Personal Account Rather Than a Business Account
Many new business owners make the mistake of using their personal bank account to also run their business. While this might seem convenient, it can make your life incredibly complicated.
For starters, when it comes to accounting, you’ll have to sift through your transactions and separate your business expenses from your personal expenses. This process can be time-consuming and frustrating, especially if you can’t remember all of your transactions.
If you don’t have good accounting practices for your business, it can become difficult to understand your position and make plans for future growth. It may also be challenging to get approved for financing or enlist investors.
Second, it can become a massive headache during tax season. One of the benefits of running a business is that you can deduct your eligible business expenses on your tax return. But if you can’t remember which ones are business and which ones are personal, you’ll have a hard time maximizing those deductions.
As you look for a separate bank account for your business, it’s also important that you choose a business account and not a personal checking account. Business bank accounts typically come with certain features that are designed for business use. For example, you may be able to integrate your bookkeeping software, easily set up payroll, and get higher cash deposit limits.
Choosing a bank that’s not a good fit for your business
When it’s time to pick an account, there are thousands of options available. In addition to traditional banks, you’ll also have credit unions and online banks from which you can choose.
Doing good research is one of the best financial moves you can make before opening your own small business. There’s no single best business bank account for everyone, so it’s critical that you take the time to understand your banking needs.
It’s also a good idea to think ahead and determine which bank accounts will accommodate your growth. Make sure the bank you choose to work with offers scalable solutions that will continue to support your needs as your business expands.
Finally, many banks offer varying forms of support to their business customers. Do some research on customer satisfaction to ensure you’re partnering with a good financial institution.
Forgetting to track your budget and spending
Maintaining a budget is crucial for a small business. Without a budget, you may end up wasting money that could be used to build your business and provide a much greater return.
But creating a budget is only the first step in the process. It’s also important to track your spending to ensure that you stay within the bounds you’ve set for yourself and your business.
Tracking your budget and spending takes consistent effort, so it can be easy to neglect. But set reminders and check in with your account to understand where your money is going and how you can better use it to build your business.
To simplify business budgeting even further, SouthEast Bank offers digital budgeting tools you can use to track your spending and savings goals automatically. Simply input the requested information, then let your mobile and online banking platforms do the heavy lifting.
Trying to track customer payments manually
The main purpose of a bank account is to hold your funds. But if you’re trying to keep track of all of your payments on your own, you may end up wasting valuable time that could be spent doing other things.
Take advantage of the digital capabilities your bank offers that can help make your tracking more efficient. For example, SouthEast Bank supports Autobooks, which allows you to send invoices to customers and clients. Once you’re paid, the revenue will go directly to your checking account.
Autobooks gives you a bird’s-eye view of the entire process. For example, you’ll be able to see which customers have viewed their invoice, which have paid, and which still owe you. You’ll also be able to generate detailed reports that you can use to develop your strategy going forward.
Not maintaining a minimum monthly balance
Many small business bank accounts require you to maintain a minimum balance every month to avoid a service fee. If your business is struggling or you’re trying to use every penny to maximize your growth, you may end up paying that fee every month.
To avoid this, make sure you always have enough cash in your account to meet the minimum balance requirement. Alternatively, you can choose a business checking account that doesn’t have a minimum balance requirement or a monthly service fee.
The Bottom Line
Running a business requires a lot of focus and organization, and avoiding these common business banking mistakes can save you time and effort along the way.
Even if you’ve already made a few of these mistakes, don’t fret. It’s never too late to fix things and set yourself up for better banking going forward.
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Information contained in this blog is for educational and informational purposes only. Nothing contained in this blog should be construed as legal or tax advice. An attorney or tax advisor should be consulted for advice on specific issues.