Reasons To Separate Business Bank Accounts In Mississauga
September 12, 2022 | Written by: Salman Sharif
As a business owner, you might find that your savings are the only source of funding for now. That’s not unusual at all! Personal bank accounts and credit cards will continue to be used to make things happen with your new company or startup.
However, as any business grows, it’s important to establish a separate bank account.
There are so many fair reasons for keeping your personal finances separate, even if it is small. It is just a single fact, but there are many more. Once you start making a profit, having a dedicated bank account for it becomes even more essential. It is relatively a good idea to think this way, “if my business fails, I don’t want to ruin my personal credit.”
Here are some key reasons to open a separate bank account for work in Mississauga:
A Business Bank Account Gives Your Company Credibility
When you’re just starting, your finances might be your business’s only source of funding. But as your business grows, you’ll definitely have to establish a bank account for it. It will give your company credibility with vendors, suppliers and customers. A business bank account fairly makes applying for loans and other financings down the road easier.
It’s Easier to Track Expenses
When you have a dedicated bank account, it’s easier to track your expenses. It is important to come tax time. You’ll be able to deduct eligible business expenses from your taxes, saving you money.
Organized bookkeeping is a key part of running any business, big or small. When you have a separate bank account, it’s easier to keep track of your income and expenses. It can be helpful come tax time or if you ever need to produce financial statements for investors or lenders. Bookkeeping is fairly a very effective method to manage the business. So try to keep things separate as much as possible. Also, read about Signs You Need A Bookkeeper In Canada.
Efficient Tax Returns
Another great advantage of having a business bank account is that it makes filing your taxes easier. When you have all your expenses in one place, preparing your tax return is simpler. It can save you time and money come tax season. No one wants to mess up tax returns.
Clear Audit Trail
If the CRA ever audits you, it will be easier to prove your expenses if they’re all in one place. When everything is jumbled together, it can be more difficult to show that your business expenses are legitimate. Legitimacy is what gives you the clean chit by the auditors.
Accurate Cash Flow Management
Another important reason to have a business bank account is cash flow management. When you know how much money is coming in and going out of your business, it’s easier to make sound financial decisions. It can help you avoid running into cash flow problems down the road.
We advise our clients to open a separate bank account as soon as they start making a profit. There are many benefits to having a dedicated account for your business. If you want everything to run smoothly, get help from experts from a professional accounting and tax firm like GTA Accounting. You can contact us, and we can help you with all your business needs!
Sohail Afzal, CPA, CMA, MBA
Sohail Afzal, (CPA, CMA, MBA) is the founder & CEO of GTA Accounting Professional Corporation. He is a highly experienced Chartered Professional Accountant and businessman himself and understands the challenges that many businesses face when it comes to cash flow management. As an experienced business consultant & tax advisor, he is helping companies grow by providing the technical, financial, and contractual information necessary for strategic decision-making.