Don't overlook the potential of a business savings account

Learn why a savings account may be beneficial to your business in the long run. 

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By Ann Marie Lynch, Senior Vice President of Deposit Products Group for Wells Fargo
Published: June 14, 2012
Updated: August 11, 2015

Setting up accounts in your business's name is an early milestone on your way to success as a business owner. While it may seem basic, giving some careful thought to this foundational decision can offer valuable perspective on how you manage your business finances — and even reveal opportunities you overlooked.

The essential first step is to separate your business and personal accounts. When you're just starting out or in tough times, it can seem easy to pay business expenses with personal cards or checks. But for bookkeeping, cash flow, tax, tracking, and credit reasons — not to mention showing yourself and others that you're truly open for business — establishing separate, business-only accounts is fundamental.

"A dedicated savings account can help you manage your business better."

But which ones? There's a huge range of options available in the marketplace, from basic checking accounts to sophisticated treasury management solutions, each with different features and benefits, minimum balance requirements, and fees. Before you even walk into a bank, think about your business needs and how you intend to meet them. What choices let you bank the way you want to? Are you getting maximum value for your time and money?

If you're like most business owners, the answers most likely include a business checking account, online banking access, and a business debit or credit card. You might skip right over the business savings account option. But this versatile, practical financial tool is worth a second look.

A dedicated source of funds

A dedicated savings account can help you manage your business better. When you have a short-term need, such as replacing or repairing critical equipment, tapping your savings for cash is straightforward and cost-effective. So is putting away some cash every month toward a big expense you anticipate, such as making a tax payment or buying seasonal inventory. Both strategies help you manage your cash flow more effectively, operate more simply, and incur less debt.

Track, monitor, record and retain

Stepping back from immediate needs, a savings account is also a good way to help you understand your overall cash flow. Using different accounts for operating expenses, working capital, and long-term needs lets your bank help you with monitoring, recordkeeping, and accounting. And if you haven't switched to online statements, this is another good way to streamline your finances. Online statements are free, secure, and typically are retained for seven years to meet any future financial documentation needs.

Cost-effective protection

Because it can link to other accounts with the same institution, a savings account also keeps your money highly available. It offers inexpensive "insurance" against overdrafts, which can be an unfortunate fact of life when you're balancing incoming client payments with outgoing vendor payments and other expenses. Moreover, savings account balances can often be combined with your other balances to help avoid your monthly service fee.

Focus on your cash flow

At this point, you might still be thinking, "If it's all my money and all with one bank, why not just keep it in one account?" Partitioning your money may seem somewhat arbitrary, but doing so in a consistent, thoughtful way is a business best practice that can improve your overall money management.

When you use savings instead of credit to manage financial ups and downs, it keeps you focused on your cash flow. Considering that lack of cash can make a business fail even when there's no lack of revenue, anything that helps you track and maintain healthy cash flow is a critical tool for success.

Whether your business is just getting started or is well established, a business savings account offers a flexible, cost-effective and strategic way to stay in control of your finances and on track for growth and success.

Ann Marie Lynch is a Senior Vice President and Head of Business Deposits at Wells Fargo.

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