Do I Need A Separate Business Bank Account?

As a female entrepreneur, you’ve probably asked yourself this question. Do I need a separate business bank account?

The paperwork and the hundreds of options can be overwhelming. If you’re starting from scratch and building your business as a sole proprietor, your startup money probably did come from your personal account. 

Sole proprietors, unlike an LLC, are not required to maintain separate business and personal accounts. But if you’re committed to becoming a professional therapist, building a client base, making your business a success, and eventually expanding, you will need a business account. 

In this article, we are going to review some of the benefits of opening a business bank account and how it will help your business find greater success.

Benefits of Opening A Business Bank Account

Organized Bookkeeping

The first and most important reason to have a separate bank account for your business is that it keeps your bookkeeping organized. As soon as you have any expenses, whether that’s your office space rent, special equipment, or software, it’s time to track them. No matter your therapy specialty, you’re going to have these expenses. 

A separate business bank account allows all your business revenue and expenses to pass through one place, without being mixed in with your personal purchases. If you or your accountant have purchased bookkeeping software for your therapy or counseling business, setting up a business bank account can save you from having to keep a folder full of receipts from every purchase you make for your business. 

You can simply connect your business account to your bookkeeping software, and every client payment and business purchase is automatically recorded and organized. Talk about a time saver for a busy woman!

Streamlined Taxes

Flowing from organized bookkeeping comes a streamlined tax season and the best use of your business expenses for tax deductions. Every expense you have for your business will reduce your taxable income, so you have to make sure you have them all in one place. 

Combing through your personal bank account statement for each business-related expenditure can lead to missed business expenses - which means that you’re missing valuable tax deductions. A business account means that all your business expenses are in one place.

Difficult Budgeting

If your business expenses are tangled in with your personal account, and your office rent is mixed in with your groceries and Netflix subscription, then it’s going to be really hard to see how much of your cash is budgeted for your business. 

Mixing business and personal finances is going to make it hard to budget effectively for either. You will need a separate business bank account to see at a glance whether you have enough cash or need to make some adjustments. 

If you need to transfer money from one account to another, or if you’re going to need a business loan (we’ll talk about that more in a minute!) having a separate account for your business’ cash can help you tell at a glance what your next steps need to be.

Customer Service

A business bank account also means better service for your clients. It is a mark of professionalism to have a business name listed on a bill to your clients rather than your personal name. 

Pretend you’re a new client. Which comes across as more businesslike - a bill from Sarah Smith, or a bill from Smith Counseling? As a therapist, you, your name, and your professional title are very much the face of your business, so you may choose to have at least part of your professional name as your business name to build trust. 

A separate account to hold your clients’ payments and your business expenses will also foster a sense of trust and privacy, which as a therapist is absolutely necessary. 

Better service also includes offering clients more payment options. Banks do not allow credit card payments to a personal account, so setting up a business account allows you to accept electronic payments and streamline your clients’ billing. If you choose to accept insurance, having a separate business name and business account will also streamline the process of receiving reimbursements. 

Financing Options

Lastly, a business bank account can also offer your business more financing options as you grow. You may need a loan for expansion or for special equipment, and if you have a separate business bank account, you can be eligible for a business loan or line of credit based on the income from your business. 

Even in 2022, it can be more difficult for a female entrepreneur to find business funding, so it is important to set yourself up for success in every possible way. 

If you have a separate business bank account, the bank can see that you are approaching your business in a professional way and they have tangible proof that you have a profitable business. This means that it will be much easier for you to open a line of credit or apply for a business loan with your bank if you already have a business account there.

Entrepreneurship is not for the weak, and as women, we often face extra challenges to make our businesses successful. As a therapist, your specialty is not geared toward finance, so it is understandable an area you may need to outsource. Separating your personal and business accounts is one of the first ways that you can help your business thrive.

To learn more about how we can help set your business up for financial success, click the link below to learn more about the services we offer.