Business Bank Accounts

[photobksolution]

I'm setting up my new small business (sole prop.) and my bank suggested that I open 2 bank accounts. One is for revenue and one is for operating expenses. She said that this would make it easier. I'm trying to figure out why 2 accounts is easier than one.

How many checking accounts does your business have and why?

Thanks!

[radiogirl]

I just have the one for business. With banking rates and charges the way they are for business accounts I don't see how it would be beneficial (or cost efficient) to have two.

On the personal side we do have two bank accounts, a savings and a checking, but those have nothing to do with business.

[Tom Young]

Originally Posted by photobksolution

I'm setting up my new small business (sole prop.) and my bank suggested that I open 2 bank accounts. One is for revenue and one is for operating expenses. She said that this would make it easier. I'm trying to figure out why 2 accounts is easier than one.

I have been in business since 1975 and have never had more than one business checking account at a time.

If you are able to obtain FEE FREE account with a second bank it may not be such a bad idea just in case your main bank has problems. I have considered doing just that.

Operating expenses and revenue should be tracked using accounting software such as QuickBooks where you would input data regarding all of your expense accounts and sources of revenue. A checking account is only a part of the whole.

Tom

[photobksolution]

Thanks. This is pretty much what I figured as well. Both of the checking accounts were free of course, so no harm there. I was just racking my brain trying to figure out why I'd need one account for operating and one for revenue when I can track all that myself with software. =)

Thanks,

[abwayne]

Things are surely much more confusing that I expected particularly when you talk about these bank accounts. Well I always fall upon this forum when I need some ideas and in this case also the idea was clear for me why I needed two separate accounts, this is something that was advised by my bank too.

[photobksolution]

I agree with you abwayne about things being confusing at first setting up a business. Do you mind telling me how two bank accounts has helped your small business?

Thanks,

[Comm Realtor]

As your business grows you may want an account just for payroll and a payroll service to handle taxes, year end W-2 Forms, etc.

[tingeofpink]

if you can save while having two bank accounts, why not? at least if one account is having problems, you still have the other one.

[janicepink]

IMO, it wouldn't be any harm if the second account is free. Otherwise I don't think having a single account would prove to be an advantage. Works well for me.

[phanio]

Look - if you keep good records - you do not need two accounts. I am a former banker and will tell you the only reason that they want you to open two accounts is for THEIR benefit.

Most bankers have sales requirements that they must meet monthly. Banks think that it is more profitable for you to have more than one product.

Example - I use to sell business checking accounts (each business account was - (this was from the bank itself) - considered worth $35 in profits to the bank. If I got you to add a debit card - another $10 profit to the bank. If I got you to add online banking - more profit to the bank (less time in front of a teller or officer). I hope you see what I am trying to say here.

Bank reps are required to sell so many products each month - if they don't they could be replaced or not receive bonuses. Thus, the more they sell you - the better for the bank and better for them.

You might ask - how a free account is profitable to a bank. 1) if you keep funds in that account - they can sweep those out overnight and loan them to other banks at the discount rate. 2) they could loan your deposits out to other borrowers at 8%, 10% or more. 3) they know that on average 9 out of 10 account holders will incur some type of fee - usually in the first month - like overdraft fees or return check fees. Plus, if they can tie a debit card to the account - they get processing fees from the merchant when you use the card.

Just my ideas on why you were asked to open more than one account.