Running a business is an exhilarating journey, but it can also be overwhelming, especially if you’re exploring an unfamiliar industry or have never previously launched a business.
A big source of this overwhelm is juggling different tasks simultaneously. From ensuring that the supply chain flows smoothly to keeping cash flow positive, entrepreneurs need to be on top of various tasks to continue operating.
For new businesses, this comes with the added challenge of setting up the right systems to scale their company efficiently. Besides acquiring the mandatory licenses and certifications, another important step businesses must take is opening a business bank account.
Unlike a personal bank account, a business banking account is specifically meant for businesses to handle business-based transactions.
The perks of owning one extend beyond its esteemed label—a business bank account simplifies the taxation and accounting process, increases partnership opportunities, and protects your assets, among other perks.
If you’re looking to legitimize and scale your business, getting a business banking account is something to definitely consider. Here, we’ll dive into an easy-to-follow guide to opening a business bank account for your own endeavors.
Let’s jump right in!
1. Knowing When to Open a Business Bank Account
If you’re able to use a personal bank account to handle your business transactions with little issue, knowing when to make the transition to a business banking account can be tough.
While small, home-based businesses can get away with using a personal bank account, established businesses should opt for a more professional banking solution, more often than not.
In particular, if your business has the following characteristics, then it may be a sign that it’s time to switch to a business bank account:
- Increasing transaction volume: If your sales numbers are continuously growing monthly, then it may be best to have a business bank account to track and store this revenue stream.
- Handling multiple employees: For businesses that employ multiple staff, having a business bank account makes it easier to pay wages and makes your business appear more professional.
- Need to get business loans: Planning to expand and take out a business bank loan? You would need a business bank account, at the very least, to be eligible for this loan.
- Additional payment gateways: Only business bank accounts with merchant features can accept credit card payments.
- Formal business structure: If you’ve established an LLC, corporation, or partnership, a separate account is a mandatory legal requirement.
If your business is experiencing any of the above conditions, then it’s a good sign to get a business bank account.
Furthermore, tax reporting becomes much easier if you’re using a business bank account. This is especially true if you have a team handling your business finances, since they’ll then be able to distinguish business transactions from personal ones more easily.
2. Selecting The Best Business Bank Provider
You shouldn’t settle for just any local banking provider in Australia. You want to ensure that your money flows smoothly, and reviewing the reputation of your chosen bank provider is crucial to ensure the safety and security of your hard-earned money.
For starters, you can look into opening a business bank account with the most popular, top banks in your country. These financial institutions tend to have established processes and top-notch relationship managers that make it easy for you to get the best access to business banking features.
Furthermore, you should also look at the different banks’ exclusive offerings and compare them against one another. Some factors to consider include their interest rates, the bank’s long-term projections, and minimum deposit limits.
If you want to get more thorough, you can consider deep-diving into client reviews to know what they’re experiencing firsthand.
Review sites like Google and Yelp, as well as social media comments, can deepen your insight into how a certain bank is performing. And if all looks good, then you can consider partnering up with them for your business banking needs.
3. Comparing and Choosing The Best Business Banking Type
Once you’ve picked a bank, you should explore their different business banking types. Each bank has different banking types with a plethora of features, but these four are some of the most common ones you’ll come across in Australia:
- Business transaction accounts: Ideal for daily operations, transaction accounts offer exclusive business features like unlimited transactions and online banking.
- Business savings accounts: Designed to earn interest on surplus funds while maintaining easy access for entrepreneurs and teams.
- Merchant accounts: Essential for businesses that accept debit and credit card payments, facilitating smooth and versatile transactions.
- Term deposits: Secure, fixed-term investments with higher interest rates, perfect for long-term savings.
You may, of course, choose to open several bank account types for your business for a more comprehensive banking solution, depending on your preference. But by researching what your local banks offer, you can make the best decision for your banking needs.
Interested in learning more about opening business bank accounts? Follow this link for help.
4. Preparing the Required Documentation
Once you’ve established contact with a potential banking partner, you’ll be guided along the business bank account opening process with them.
Besides the filled-up application form, they’ll typically request the following documents:
- ASIC registered business name
- Business registration certificate
- Australian Business Number (ABN)
- Valid IDs of business owners and directors
- Tax file number
- Business structure documents
Once you’ve secured and submitted these documents, you’ll get approval after a few days and can fully utilize your bank account. This, in turn, sets you up for a smoother time handling business transactions and operating your enterprise in general.
5. Activating Your Business Bank Account
Once you’ve got an activated business bank account, you have a world of options ahead of you. You can start small by making an initial deposit—which is typically a requirement to avoid incurring fees.
From there, you can further improve your business bank profile by setting up the following things:
- Download the banking app and connect it to your business phone
- Link relevant payment methods to your new business bank
- Set up direct deposits for automatic billing needs
- Granting access to features of your business account to relevant staff members
Besides that, you should also notify relevant stakeholders of your new business bank so that they can use it moving forward. You should also migrate data hosted on your old banking account to your new one, if possible.
6. Securing Your Business Bank Account
It’s vital to secure your bank account to ensure that your finances are safe and well-guarded. This is especially true for business bank accounts, as not only is your livelihood at stake but that of your entire staff as well.
To secure your account, start by setting up a multi-factor authentication (MFA) for all account logins to add an extra layer of security. You should also use a strong password that utilizes symbols, numbers, and letters with different caps to prevent unauthorized access.
If your employees also have access to your business bank account, educate them on proper cybersecurity threats to help them avoid compromising the account. You may also consider getting anti-virus software to keep your data and privacy safe from malicious actors.
A secure business bank account is essential, as one mishap or breach can lead to a major financial dilemma for your business. As such, be sure to limit access to only relevant parties and employ the best safety practices when transacting and using your bank account.
7. Maintaining Your Business Bank Account
Your bank account will likely be used for years to come, or as long as your business is operational. As such, it’s essential to regularly maintain your business bank account to ensure smooth operations.
For one, you should ensure that your finance department is making the most of the information from the bank account. Audit and assess your monthly statements and ensure that there are no discrepancies in the reports.
You should also update personal and business information as needed. For example, if you have boarded a new company director, then indicate that to your bank provider as soon as you can to ensure that they have the right information.
Furthermore, if your business is growing and your bank account is starting to become a bottleneck, then consider upgrading to accounts with better features. This can set your business up for long-term success.