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A checking account can be a vital part of your business operations. When I started doing market research for Business Budget Coaching, I had really no idea what I was going to find. I talked to tons of small businesses about how they manage their business finances, just looking for a “current state.” Solo entrepreneurs were struggling with their finances.
I was shook.
Forget businesses with business savings. They didn’t even have a business checking account. That was when I really decided that I wanted to move forward with Business Budget Coaching. If people lacked the basic checking account to manage their finances, what else were they struggling with?
As an entrepreneur that has ridden the struggle roller coaster for years, I knew that my stories and experience could help. I started my entrepreneurship journey SIX years ago in 2015. And it brought me so much passion towards finances and freedom. I have made a lot of mistakes along the way. I have learned a lot of things. My small business is what lead me to my debt free journey two years after I started because I knew I craved freedom.
So what does this have to do with you?
Are you a small business owner that can’t tell you how much your business brings in? Does tax time make you want to pull all of your hair out and cry? Do you feel like you are constantly working on your business but never really seeing growth or a profit? I want you to change those things.
We are going to start with the absolute basics and build from there. I wrote a blog post outlining the things you need for successful business finances. And I have another one to get the most out of your side hustle.
Both of them tell you that you need a checking account for your business.
This blog post is going to show you how to use 3 bank accounts (2 checking accounts and 1 Savings Account) to mindlessly manage your business money. I want to say that this is absolutely the BARE MINIMUM that you need and there are ways to have a lot more!
So here is a breakdown of the 3 bank accounts:
1. Business Checking account.
YOU NEED A SEPARATE CHECKING ACCOUNT FOR BUSINESS.
Okay. I am done yelling, but that is absolutely a hill I will die on. There are benefits to opening a Business specific checking account, but depending on the size of your business, you might not need it. I am not an expert on this and you should look into the pros and cons of both. Regardless of the accounts you choose, open a checking account that is ONLY for business transactions.
ALL of your income sources should be linked to this account. Any income that comes through PayPal, Venmo, Square, Stripe, or any other sources should be linked to THIS account.
ALL of your expenses should come out of this account. Your website, your etsy fees, your email service. EVERYTHING.
This account should also have a debit card linked to it for business spending purposes.
2. Spending/Profit Checking Account
This account is one of the accounts I talk about with my 5 personal bank accounts. This checking account is specifically for your spending. You should also have a debit card linked to this account.
ALL of your personal spending comes from this account. Groceries, gasoline, clothes, restaurants, coffee, etc.
Anything that is NOT a business expenses is paid with this account.
3. Business Savings Account
This is the MOST important aspect of a business in my opinion. In order to be able to grow and sustain success, you have to have future plans.
This is the account that you aside for taxes, equipment upgrades, websites, travel, and trainings. I use a lot of sinking funds when it comes to my business to be prepared for the future.
Here is how to keep this super simple:
- Income comes in
- Divide what percent goes to business expenses, savings, and profit.
- Transfer taxes and savings to business savings
- Transfer profit to personal checking account.
- Keep business expense portion in business checking account
- Repeat EVERY time income comes in.
This process will probably take 3-5 minutes when income comes in. It might seem repetitive at first, but you will be surprised at what a difference it makes for your business. I have just made it a habit to check every morning to see if there is anything I need to move around!
Once you have this system down or if you have more consistent income, you can automate it. But it is always a good check in for me to see that I have income and expenses coming in and out. It is also so nice to be able to see where it is all going!
Using the 3 Bank account method not only helps you manage your money and actually pay yourself, it actually makes taxes 10x easier because you should be able to print your bank statement and attached supporting document. There are actually a lot more bank accounts that could easily make this process more automated for you as well, but if you are just starting your side hustle/ business, three accounts is the bare minimum to get started!
If you are getting started with your business budget, download the free mini budget workbook to help walk you through the steps! Or check out my Business Budget Coaching!
