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FOUR BANK ACCOUNTS YOU CAN BANK ON.
Hey Founders,
If organizing your business finances isn't your top priority, rest assured you're not alone. Surprisingly, a recent TD Bank study revealed that 27% of small business owners use a single account for both personal and corporate finances.
After working with numerous Founders over the past 30 years, I can make a compelling case for having multiple business bank accounts, four to be specific, despite the initial frustration of getting them set up. To help you decide if this
strategy is right for you, consider these merits:
STAY ORGANIZED //
Allocate four different accounts for four different purposes:
Operations
Future Expenses
Taxes
Savings [Net Profit]
This provides a clear financial snapshot and keeps you on track with long-term goals.
KNOW WHERE YOU STAND //
Separate accounts ensure you're aware of available cash. It prevents overspending and ensures you have enough to cover expenses when they arise. Developing this habit is crucial for maintaining a healthy cash flow and avoiding one of the top reasons businesses fail.
ESTABLISH A STRONG TRACK RECORD //
Maintaining multiple accounts helps build a solid financial track record, essential when seeking additional financing. Lenders often require detailed records, and a history of healthy cash management enhances your creditworthiness.
ADD A LAYER OF SECURITY //
With security threats rising, safeguard your business by keeping funds in different locations. While not foolproof, it adds an extra layer of protection against potential hacks. Inquire about additional security measures when opening your accounts.
HEADS UP!
Despite the merits, beware of minimum balance requirements and transaction fees imposed by most financial institutions {FI]. Before opening multiple accounts, understand each FI's policies and associated penalties.
THE BOTTOM LINE IS THIS...
Most money sitting in your business account isn't necessarily yours to keep. By placing your taxes, direct costs and savings into respective holding accounts [in trust] you prevent unnecessary spending and ensure you always have the necessary funds for your business.
ABOUT TAUNYA WOODS RICHARDSON
Taunya is well-known for her straight-shooting, bottom-line-building approach to founder finance. As the Founder of Nail The Numbers, she brings 30+ years of experience in entrepreneurship, finance, and neuroeconomics to our mission of strengthening the minds and bottom lines of Founders across North America.
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