Does my handmade business need a separate bank account? That’s a question I see a lot. My answer is YES! One of the first steps to a successful bookkeeping system is to set up a separate bank account just for your business “stuff”.
Having a bank account for your handmade business makes it so much easier to keep track of bookkeeping type things.
There really isn’t any “rule” about using your personal checking or savings account for your business if you’re a sole proprietor. Don’t worry if you have been using your personal accounts, it’s not illegal.
But, if you want to be a business, well, you need to act like one.
Here are two important reasons for having a bank account for your handmade or creative business.
- When you have a business bank account, you can also get a debit or credit card in your business name and start building credit for your business. This makes it much easier to keep track of purchases you make and building credit for your business is as important as building your own personal credit.
- You can also accept and deposit checks made out to your business. Many banks won’t let you deposit or a cash a check into your personal account if the check is made out to your business name.
There’s also a third very important reason why you should have separate accounts.
When you have both personal and business expenses coming out of a single account, it actually makes your bookkeeping harder! You have to spend more time on bookkeeping tasks to keep everything straight and in order. It means sifting through a lot more transactions in order to figure out what’s personal vs. what’s business.
Shopping online on Amazon is a good example – let’s say you purchase both personal and business items from Amazon. Are you going to know when you look back at your personal credit card statement which purchases were business and which were personal?
Having separate accounts takes care of all these problems and makes your record keeping and bookkeeping easier to deal with:
- You’ll know exactly how much money belongs to your business.
- Be able to keep a better eye on the money coming into and out of your bank account.
- Make better business decisions, like if you can afford to make that big supply purchase.
- You won’t be using personal money to fund your business without knowing it.
Stop back tomorrow when I talk about finding a bank that meets your needs.