Coffee spills and keyboard crumbs – oddly enough, they share something in common with business owners who choose not to open a business account. Both are small oversights that can lead to big messes.
Skipping the step of opening a business account is equivalent to inviting chaos to a company’s financial management. Yet, some knowingly neglect this important step. Worse so, they have reasons for it. Read on to find out why some business owners make this risky financial move.
- Perceived complexity of the process of opening a business account
Despite financial technology having grown much past its infancy, some business owners still perceive electronic banking to be just as complex as it used to be a few decades ago.
To those less aware of the concept of online account opening, the process of opening a business account might still conjure images of sitting at the bank, filling out and signing forms, making copies of documents, arranging for minimum balances, and whatnot. This could seem like a lot of work to do for those short on time or those starting with limited capital. Naturally, this aversion would mean making do with personal accounts for business transactions. Once a business owner becomes accustomed to this approach, it’s hard to look back.
While this process used to be the norm, it has merely become an option in the 21st century. Many banks and financial institutions allow remote account opening. All documents can be submitted online for verification, and a business account can be opened without even stepping out of the office. Further, many institutions no longer require a minimum balance.
- The belief that their business is too small to warrant a separate account
Not all business owners start their ventures with confidence. Some are accompanied by anxiety, too. Such entrepreneurs are usually resilient to failure and believe in staying flexible. However, for some, this mindset could subconsciously brood doubts about whether to classify their business as a commitment. To those starting small or with an unclear path in sight, opening a business account may seem like an unnecessary step toward something they’re not sure would do well in the future.
While this explanation may sound reasonable, it doesn’t paint the complete picture. Opening a business account is proof of commitment not just for the business owner but also for customers and everyone involved in a firm. A lack of a business account may give off a wrong perception that the business isn’t legitimate. Such perceptions don’t just ward off customers but also investors—both of which are important for bringing in revenue. Thus, a lack of business accounts essentially fuels the chances of a company underperforming.
- The assumption that personal account features are sufficient for business needs
Most people perceive bank accounts as primarily used to store money. But does that mean all types of bank accounts are the same? No. Alas, some business owners think otherwise.
To a few business owners, there seems to be no major difference between a personal and business bank account. As a result, the use case of getting an entirely new account for their company can (falsely) seem like an overkill.
In reality, there are significant differences between a personal and business account. Business account providers provide merchant tools and business credit cards that are typically not available to personal account holders. These tools can help increase business efficiency. For instance, a corporate card can be efficiently used to simplify expense management. These cards are similar to personal credit cards but can be issued to multiple people from one business account. Employees can use them to make business payments; for financial teams, this can be a breath of relief from the reimbursement process.
In essence, business accounts provide greater autonomy over financial operations by simplifying expense management and building reputation. Yet, a few business owners overlook these benefits due to their assumptions about the complexity of account opening, uncertainty about business performance, and more.
It’s strongly advised for any new business owner not to fall for these assumptions and to fact-check the utility of business accounts. More often than not, these accounts will be the first brick in the wall of business growth.
