When your business begins to interact with money and exchange funds, launching a corporate account becomes expedient. Banking allows businesses keep money as a store of value. We are not in the clay pot and piggy box era anymore. Thus, a corporate account or business account that helps you keep track of your business transactions is a must get.
Money is the driving tool of the business world and the backbone of every business entity. The movement of business money from one destination to another becomes cumbersome. Banking is a surefire way to simplify it. According to the SMEDAN National Survey of 2017, there are around 41.5 million SMEs in Nigeria.
However, it is a know fact that most entrepreneurs launch their businesses with their own personal bank accounts as opposed to a separate dedicated account. They do not find it necessary to use a different bank account (could even be another savings account that is not is use). This is dangerous because of the resultant financial inaccuracy occurring as a result of merging business funds with personal funds.
What Does It Mean To be A Corporate Entity
The term corporate is from the word CORPORATION. A corporation is an organization usually a group of people or a company authorized by the state to act as a single entity in legal, recognized by private and public law for certain purposes. A corporate business entity, you can perform activities, such as running an enterprise or holding assets. Although it may comprise of individual directors, officers, and shareholders, a corporation is a legal entity in and of itself.
This means that in the eyes of the law, an entrepreneur and his/her business are not the same neither are they married or joined together and for this cause, should bank accounts be kept separately. This is why it is very important for business owners to open a separate bank account as well in this regard of it being a separate entity.
Why Do Need A Corporate Account
- To Determine Startup Capital
You want to be able to accurately determine the amount of money used to start the business. You want to determine the capital required for pre-seed investments. As a start-up, it is very important to know how much the business is starting off with to efficiently and effectively value the business. But if company’s funds have been mixed with private funds, and the difference is not put down in writing, how can pre-seed investment and your own equity be accurately calculated? As time goes on, there would be difficulty in ascertaining the amount the business has made. Don’t start it with your own private account.
2. To Create A Professional Impression
The benefits of a corporate account for a business supersedes just separation of funds to track startup capital. It is also essential to track financial progress of the business. Opening a corporate account will give your small business an impression of professionalism and you know the saying: first impression stamps a huge impact. A corporate account that bears your business legal name promotes a solid brand image to investors, stakeholders and potential clients.
Imagine trying to pay for a reasonable sum for a service, and you find a bank account with a personal name. What would you be thinking? Wouldn’t you feel like you are about to get unsafe? This is the subtle impression your business will give clients.
3. To Get A Loan Or A Business Grant
Financial organizations will not release business funds to a personal account because the account name carries your birth name instead of a corporate name. This is why your savings accounts cannot access bank loans. Furthermore, many grants will rather fund your corporate account. They want to be certain that they are dealing with the right entity. This is because you are not your business in the eyes of the law.
4. To Reconcile Figures and Track Finances
Another benefit of having a corporate account is accurate financial reconciliation. As the business gets bigger, the figures in your accounting books will need to match with actual funds in the bank. When there is a figure conflict, business owners are unable to accurately reconcile bank balances with book balances.
5. To Operate Without Limits
Furthermore, transactions in large volumes can be done very frequently and efficiently with a corporate account. If your business keeps on running, the process of sending and receiving huge amounts cannot be efficiently achieved with a personal account. This is because most personal accounts have daily limits.
6. To Use Advanced Banking Functions
Opening a corporate account also allows you to use cheques as a means of money transfer. Cheques are documented for corporate referencing and in the situation where money needs to be sent to another party and the business lacks the funds at that exact time, it can issue a post-dated cheque to be redeemed at a futuristic date when the funds will be accessible. Some corporate account providers allow you to get structured statements of accounts and visuals for your cash flow reports, closing and opening balances.
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I am the lady with the numbers at OG capital. Graduate of accounting from Bingham university and a Business Valuation officer from CFI in view. Fun loving and kind. Living the life of christ