Got your solopreneur business bank account?

by Michele on October 17, 2013

Your solopreneur bank accountOpening a separate bank account is a step that a lot of solopreneurs miss in setting up their business.  Especially in the early days when there aren’t too many transactions, it seems to make perfect sense to use your personal account for business use.  I admit, I did this early on.  I just didn’t see the point of a separate bank account when I had so few payments per month and some of them were through Paypal.

I used a spreadsheet to keep track of income and expenses before I had a dedicated bank account.  While it did the job, it made my taxes much harder than they had to be.  I had to go back and categorize everything according to the categories on the tax forms by hand.  I also had  to record everything twice – once in the account and again on my spreadsheet.  I had to be extra careful to remember to add income and expenses to my spreadsheet.

Perhaps the biggest drawback to any pieced together system for banking is lack of information to run your business.  There’s no way to see which services are making money.  There’s no way to see what you are spending money on.  You can’t tell who your biggest customers are or get any meaningful information to help you make better business decisions.

It’s almost impossible to get things right on the first try in your business.  Success is a process of trying new things, measuring if they work and making changes.  If you can’t even measure the most basic thing in your business – what is changing your bank balance – you’ve got almost no way to course correct.

If you don’t already have a dedicated bank account, open one now.  You’ve got over two months until the new calendar year, and if you do it now you’ll be able to have your entire next year with your dedicated bank account.  It may not help you this year, but next year will be much easier in terms of gathering data and filling out your taxes.

There are a few other benefits of a dedicated bank account.  You can customize the name that appears on your checks, which may help you look more credible to people you pay.  Having a dedicated bank account may also help you feel more like a “real” business.  When you work at home, by yourself and do everything yourself it can be hard to feel legitimate.  A separate bank account also helps you maintain some separation of your personal life and your business live which is a constant challenge for solopreneurs.  A final advantage is that you can link a bookkeeping software to your dedicated business account making it easy to run reports and see where you are making and spending money.

I cover this in a lot more detail in my system for setting up a solopreneur business “The ABC’s of a Successful Solopreneur Business.”  The system lays out everything you need to do to get your business set up properly in a step by step manner.  Get more information on the system including some great bonuses here: The ABC’s of a Successful Solopreneur Business.

Do you have a dedicated bank account for your solopreneur business?  If not, how do you manage your finances?  Tell me about it in the comments.

 

Comments

  1. Dawn Mentzer says:

    Great post, Michele! I, too, started with just my personal checking account and kept track of business expenses using Excel and receipt records. It’s SO much easier to have a separate account for business. Same with the credit card as well.

    1. Michele says:

      Thanks Dawn! I know what you mean – it’s so much easier with a separate account!

  2. Mozette says:

    As soon as I knew Lynda’s Crafty Pegs was going to be a side business – even a hobby business – of mine, I set up a sub-account. This is an account which can be attached to your main bank account but you can only access it through phonebanking and not the branch.

    It’s much safer and a lot easier to use. People can put money into it, but not pull money out of it unless it’s you as there’s an account code you must enter to get money moved and pulled out of it through phonebanking… very good and safe if you ask me.

    I’ve made only a little bit of money from one of my friends and she gave me cash, so I went to the bank and put the cash into the sub-account (great thing this, that you can do that, but not take money out through the branch) and then once you have money in there, you can gather interest, and have almost no account-keeping fees… even better too.

    I have a bsb number to give to my clients and the account number, and then they move money from their bank to mine and then I send out my Crafty Pegs, Magna-Pegs or the Cool Pencils and Dolly Pegs they’ve ordered… and it’s all sweet. I use the account to post them off and then make more money when the next person orders another set.

    However, the setting up of my little hobby business is out of my own pocket. I’ve made it as cheap as possible, and tried to keep costs down as low as possible. I’m buying paint and spray varnish in bulk (it’s a lot cheaper that way) and then next month (on 24th, November), I’m attending The Creative Markets at Springwood (not far from me here in Queensland) at my old primary school where I’ll have a stall there… very sweet indeed… where I’m hoping to make some money there.

    The one thing I’m not worried about is being intimidated by the other people in the other stalls – I’m just not the type to be put off like that. If they think intimidation is going to work, well, it just goes to show how nervous they are about a new person coming in and working the stalls and how much they’re not making themselves… that they might be doing something wrong in their business world; whereas I may be keeping the right things going – and yet missing out on a couple of things I didn’t think of.

    But I’ve been reading your blog long enough that I’ve had the confidence to do this. And really, I must thank you for helping me build my confidence to do this – otherwise I’d have never done it in the first place. 😀

    1. Michele says:

      Great job Lynda! Love that you just figure out what works and move ahead – way to go! Good luck at the stalls!

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