People start businesses for many different reasons, but at the end of the day, the goal is usually to make money. Once you’ve done that, you need a place to keep it. That’s where business banking for freelancers comes in.
Freelancing is demanding. From employment to accounting and finances, you run your own business alone. As your business and income develop, you may feel like you’re wearing a dozen hats.
Business banking for freelancers shouldn’t complicate things!
Whether you’re just dipping your toes into freelancing or are a seasoned professional, a business bank account will help streamline your business and make your life easier.
Say hello to our comprehensive guide to small business banking. In it, you’ll find everything you need to know about small business bank accounts, the reasons freelancers need a business bank account, and what to look for when choosing one.
What is a small business bank account?
A business bank account is a checking or savings account specifically designed for business use.
The main difference between a business account and a personal account is that business-oriented features are often added to business accounts. These features can include:
- Bookkeeping tools and automation
- Invoicing tools
- Credit card processing
- Tax and expense tracking
We’ll go into what to look for in a small business bank account later, but these features can make your life as a freelancer or small business owner much easier.
Ideally, you can get all these in a single solution that integrates directly with your banking, making your financial processes seamless.
7 reasons freelancers need a business bank account
A business checking account allows you to store cash to make purchases, track expenses and income, and simplify taxes. It also helps keep your personal finances separate from your business.
Additionally, with business banking, there are several major advantages beyond the basics:
1. Separate business expenses from personal
If your business and personal expenses come out of the same account, it can be challenging to keep track of which is which. That makes accurate reporting time-consuming and complicated. The last thing you want to do at tax time is comb through weeks, months, or potentially a whole year’s worth of transactions to find business expenses.
Having a separate business account eliminates this issue. In addition, when everything appears in one account, you can simply run down the list and add everything up (or have software take care of it for you).
This turns a potentially hours-long process into one that takes just a few minutes, making it easy to write business expenses off as tax deductions.
While we hope it’s never the case, having separate accounts is also important if you’re ever audited. Keeping things separate makes it easy to show the IRS what they need to see and ensures that there are no questions about whether a particular expense was for business or not.
2. Keep track of taxes.
Dealing with your own taxes is a reality for many, if not most, freelancers. But, even if you have an accountant to do the heavy lifting, you’re still responsible for keeping things tracked and categorized accurately.
Once you’ve determined how much you owe, you have to actually make the payments. The IRS technically requires quarterly tax payments, and there is a penalty (albeit small) for not paying by these deadlines. You can spread these payments out however you like, as long as the full quarterly amount is in by the deadline.
A business bank account makes it much easier to keep track of these taxes for three reasons:
- Having all your income and expenses in one place makes it easier to calculate your estimated payments.
- The extra features that often come with business bank accounts can make calculating and paying your estimated tax payments much easier—even automating them.
- Business bank accounts often come with a separate tax savings account that will automatically withhold the correct amount from deposits so you can save as you go.
3. See all income and expenses in one place.
You have to see all your transactions in one place to get a high-level overview of the health of your business, and having a single account that everything passes through makes this possible.
This is especially valuable now, as many freelancers and small business owners look to recession-proof their businesses.
Having the right software and user interface can make a big difference. Good tools will enable you to quickly get an overview of your account, letting you know how much money has come in, when it came in, and how much is going out. This is essential to proper financial planning.
4. Look professional to clients and customers.
As a freelancer, the quality of your work is critical to your growth. It’s also important to present a professional appearance to clients and customers.
Business banking for freelancers often comes with perks like a personalized debit card, invoices with your business’s name, and other branded items. These may appear insignificant at first glance, but when taken together, they can provide a lot of additional evidence to your clients that your company means business.
Ultimately, this can directly impact your bottom line—freelancers that look more trustworthy, professional, and “legitimate” may be able to command higher rates.
5. Easily track expenses and tax write-offs.
Paying for all of your expenses from a single account simplifies tracking because everything is in one place. Accounting software linked to your bank account can automatically retrieve and enter these transactions into your ledger. That’s right—business banking for freelancers can be easy!
For tax purposes, it’s important to put your expenses in the right category, since the IRS has strict rules about what you have to report and how you have to report it. There are also certain categories of expenses that are eligible for these deductions.
Eligible expense categories include:
- Contract labor
- Office expenses
- Vehicle expenses
Finding a tool that can pull your expenses from your bank account and automatically put them into categories can save you time and make sure that your expense reports and taxes are correct.
6. Save time on administrative tasks.
The phrase “time is money” rings true for business banking for freelancers. When you aren’t doing client work, you aren’t earning money.
Minimizing the time you spend on administrative tasks (like logging and categorizing expenses or creating invoices) means you can spend more time doing what you love—and what brings in the money.
Having a business bank account helps save time in a few ways:
- You don’t need to spend time hunting for transactions across multiple accounts because everything is in one account.
- Connected accounting software can pull those transactions and automatically assign them to the proper categories, saving time on bookkeeping tasks.
- The account may have tools to automatically calculate tax requirements and write-offs, which keeps you from manually needing to do these tasks.
Anything you can do to streamline your operations is a plus. Adding another bank account may seem like it will complicate your operations, but the opposite is actually true. It ends up simplifying things and keeping you from adding work hours.
7. Reduce costs and save money.
Accounting software is powerful and can save tons of time. But it can also be expensive. Business bank accounts often come with built-in tools that can eliminate the need to pay for these pricey accounting systems.
While you could pay for an expensive and complex system to track your expenses, you could also find a business bank account that automatically pulls and categorizes these transactions for you.
What to look for in a business bank account:
When it comes time to choose business banking for freelancers, the sheer volume of options can be overwhelming.
It seems like every financial institution and bank offers multiple accounts, each with different features and perks. What’s more, there’s rarely clear guidance on which features are actually best for a small business.
Here are some of the key business bank account features to look out for:
- No hidden fees: Many accounts have various fees attached to them. While these fees are often waived with a minimum account balance, that can be harder in the early days of your freelance career or when your monthly income varies.
- No minimum balance: While you’ll likely maintain some level of consistent balance, it’s hard to know just how much, particularly when you’re first starting out. Finding a business bank account with no minimum balance requirement means you have one less thing to worry about.
- Easy access: Bank accounts don’t do much good if you can’t access the funds in them. That means a debit card is essential. You should also consider whether cash withdrawals are important and if you mind paying a fee for them—this may influence your choices, as not every bank will have local ATM access. Do you need physical branches and in-person support, or is online only okay? If the latter, you have access to several unique options. Just make sure the website and mobile app are functional.
- An easy-to-use, functional mobile app: Mobile access is more important than ever. You may need to check balances, transfer money, verify payments or purchases, or make a mobile deposit at any given time. Being able to do so quickly and easily is important. Your bank should offer a solid mobile experience. That is easy to navigate and simple to use.
- Connections to other services: Business finances no longer exist in a vacuum. Whether it’s invoices, bookkeeping, an order management tool, or an e-commerce platform, the apps you use to run your business should connect seamlessly to your financial systems.
Business banking that does more
Found’s all-in-one banking solution simplifies business banking for freelancers while saving you time and money.
Signing up for a business checking account gives you access to a suite of free financial tools, making it easy to track expenses, estimate taxes, and keep the books organized, all from one easy app.
Try it out today—it’s smart, simple, and free to sign up for.
Found is a financial technology company, not a bank. Banking services are provided by Piermont Bank, Member FDIC. The Found Mastercard ® debit card is issued by Piermont Bank pursuant to a license from Mastercard Inc. This material has been prepared for informational purposes only.
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