Why You Should Open A Business Savings Account For Your Business

Should I have a business savings account for my small business?

Yes! Here are a few reasons why you should consider using a business savings account:

1.Save money for taxes.

Instead of reacting to a tax bill, proactively save to pay your tax bill. There’s nothing worse than completing a full robust year of business to drain your bank account for the IRS or the state. It comes all at once and can feel like a blow to your gut! A better approach is to watch your numbers and reports. Specifically, after your bookkeeper is done reconciling the month or quarter look at your net income. How did you do? Any profit? If you’re in the black and have a net profit that’s great! It truly is. Succeeding and being profitable is the goal versus spending everything you made and breaking even.

Now take out your calculator and do some basic math. Consider taking 30-35% off that net profit and transferring it into a savings account. Again, you could do this monthly or quarterly. Regardless, the money will be set aside and ready to pay whether you make estimated tax payments or if you pay one lump sum during the tax return season.

“Consider taking 30-35% off that net profit and transferring it into a savings account.”

2. Save money for the unexpected catastrophes.

I know none of us want to rehash or dwell on what happened when the Covid 19 pandemic hit America in 2020 but I will say, that the businesses that had stashed away cash and had a nest egg of savings made it through. At this point you might be thinking, that was pretty extreme, and it won’t happen again and perhaps you’re right! However, I would rather you plan for the worst and save for the unexpected accident or unexpected lawsuit.

Wouldn’t it be better to make it through than lose the business you’ve worked to build with sweat and tears? Consider moving 5-10% into savings each month for such as day as this. That way when the next big, unexpected event happens, whatever that looks like, your business has a greater chance of survival.

3. Save money for growth and expansion.

Most businesses have a dreamer and visionary on staff. This person is great at thinking five to ten years down the road! This isn’t my strong suit, but I’m envious of how they can create excitement and a vision for expansion and growth. It could look like a second or third location. It could be employing more people and more management. It could be introducing a new product line or stream of income.

Whatever the brilliant idea is, it will take capital and planning to execute. If your management team has a goal to reach this expansion start saving for it today. How great would it be to buy that building, buy a new company truck, or fund that third and fourth payroll salary is money set aside to grow? Instead of going into debt or drawing on a line of credit plan ahead and save for that growth.

With money set aside in a savings account, it provides a sense of relief and freedom. Relief to not worry over tax time or during an economic or health crisis. A peace to know you’re ready for whatever comes your way. It provides a sense of freedom to grow and expand when the timing is right. The budget and plans have been set and now you can save to execute that goal and new vision for your company. I hope you’re inspired to think through your motivations to maintain or open that new savings account.

We know that financial planning for your small business can feel overwhelming, but it doesn’t have to be. Schedule a complimentary consultation with Amber’s Bookkeeping today!