Several companies do not see the purpose of having a savings account when they already a checking account to manage their money. Having a business savings account is the best option for those looking to store their earnings and make money management more convenient. In addition, lacking business accounts can create chaos between personal and business budgets. This is more essential for small, self-funded businesses.
Opening a business savings account does not mean you’re required to deposit large sums of money. Small amounts can dramatically add up over time. Experts suggest that you save at least 10% of your profits until you’re able to reach a satisfactory safety net for your company. You can then scale up or down your deposit. Here are the top five reasons you need to have a business savings account. Check them out below.
Emergencies and maintenance
Dry seasons are difficult times for any business. Liquid assets are the best option to cover unexpected expenses. A healthy savings account can obviously help your business stay financially fit even when sales become tough. You might need to adapt to certain market changes to continue appealing to new customers. You might have to upgrade your technology solutions or tools so you won’t be left behind.
Furthermore, you’d also want to have that extra fund to cover the maintenance of your workspace or premises. These can include regular HVAC maintenance, electrical repairs or replacements, plumbing system inspection, lawn care or snow removal service, or lighting system upgrades. Insulate your business from unexpected emergencies and regular maintenance works by growing a savings account.
Financial protection
Opening and building up a savings account can help protect your finances in many ways. For one, it can help you have your own overdraft account and avoid paying for overdraft fees and interests from financial institutions. You can cover overdrafts by setting aside money into your savings and linking it to your checking account. Using your business savings account as overdraft protection is a great way to avoid those unpaid items.
Interest rates on several savings accounts are also beneficial to achieving good financial health. Depending on the length of time you want to lock your money, you can earn high rates of interest from options like term deposits.
Expansion and growth
As a company owner, it’s necessary to be ready for the opportunity of expansion and growth. This is why building good financial health is essential so you can continue competing whatever the marketing situation is. And to make your company function well, you should know where to invest your resources.
That said, take note that some investments and purchases are only achievable for those that built years of savings. And remember, big businesses work on big projects to stay big. If your goal is to be big, start saving today so you can afford longer and bigger projects for future growth.
Business taxes
Most of the time, company owners are so caught up making money that they forgot to pay for their taxes. One day your business bank account looks healthy, and the next day, it doesn’t look good because it’s tax season. By building a savings fund, you can fulfill your business tax obligations more conveniently. You can put your quarterly or yearly tax payments into your business savings account. Having 30% of your gross income is a safe place to start. Your company will be subject to tax interest and penalties if you miss your tax due dates or you did not file at all.
Creditworthy
If you are looking to apply for a business credit card, loan, or overdraft in the future, building up a savings account can help you out. A history of setting aside a portion of your profits weekly or monthly proves you are disciplined in saving and managing money. Lenders find businesses with healthy savings accounts attractive. This minimizes the risk of getting rejected when you apply for business financing. Plus, there might be lenders who will even call you first to offer their options. Anyhow, if you can build up enough savings, you may not have to borrow and take advantage of compound interest.
Without a solid financial cushion, your business can have a hard time achieving its full potential. By opening and maintaining a savings account, you’re giving yourself these amazing benefits. From improving cash flow management to increasing your company’s long-term stability, a savings plan can help you out. Find a credible financial institution and choose the best solution that suits your business needs and preference.