The numbers from the Labor Bureau show that 71% of all small businesses in the US have a business savings account, and even though they’re that popular, these accounts see little to no activity in their lifetime.
This is mainly due to small business owners abandoning them upon closing their business, leaving just the minimum amount of money still deposited in the account.
Opening a business is no easy task, and keeping it afloat for over a year or two is even more difficult, which is why you should account for everything from the very start.
Every single dollar counts, and even if you may not have a checking or savings account for your personal goals, your small business may need them in order to remain profitable for extended periods of time.
63% of small business owners open one of these immediately after opening their business, and if you’re just starting out, they can serve as a great way to build on a foundation and help your company’s growth.
More often than not, a business will use a savings account to store their income and earn interest on it, and due to it being a business account, a bank may even waive certain monthly fees if an agreed-upon balance is met.
It’s also highly recommended that any small business owners looking to create an emergency fund or save up for retirement invest in a savings account for their company instead, as they offer a wide array of benefits.
Further inspection found that 23% of business owners use their savings account as a way of covering expenses, whereas 15% use it to hedge against losses if their business takes a downward spiral, with another 14% using them to save on taxes.
In fact, only 8% are working towards some specific amount of money, and you could learn from them if you’re looking to start a small business of your own.
Is it worth the time and the investment?
Generally, there are a number of reasons to justify opening a savings account, ranging from saving up for retirement to getting out of debt or even hiring additional employees for your company.
The main difference between small and large businesses is that the former can save money on the go, setting aside just enough to build an emergency fund at a snail’s pace while also retaining the financial security of their business.
On the other hand, you could also deposit all of your savings into the account at once, maximizing the interest rate you’ll be getting, which can help you generate an incredible amount of return on investment, so long as you’re patient enough.
You should note that a lot of different criteria go into opening one of these accounts, and you’ll want to make sure you can actually foot the cost of the monthly maintenance fees, ATM fees, and the fees you may end up paying if your balance takes a dip below the lower limit.
Unlike savings accounts, your checking account isn’t intended as a long-term storage of value, and you’ll be using it for your everyday spendings like purchases or bill payments.
With a checking account, you can make deposits and withdrawals at any time without a fee, and you can even offer to write out checks for people.
Much like with a savings account, your bank may spare you from paying certain fees if your balance reaches an agreed-upon minimum, so make sure to shop around for the bank that will make this worth your while.
Different banks will offer varying terms for a checking account, and you’ll want to take note of everything they’re putting on the table, from the balance requirements and interest rates to transaction limits and physical locations of the bank in your area.
Another thing that’s very specific to a business checking account is the inclusion of employee debit cards, and if you’re running a business with multiple employees, you’ll need the bank to offer this option as well.
At the end of the day, your small business’s capabilities will be what decides whether savings AND a checking account are absolutely necessary at the time.
If you’ve already got a personal account that you use for day-to-day shopping, there may be no need for a business checking account, unless you’re looking to save some extra money on the fees you won’t be paying.
Of course, if your company has more than 1 employee, you’ll need a way to offer payment for their services, and you can do this with employee debit cards that a checking account can provide.
To do this, you will be required to provide your Employer Identification Number as well as some documents pertaining to the formation of your business and a business license.