With the increasing availability of business financing including merchant loans for startups, organizations grow more quickly.
Most of them eventually contend with one common question as their businesses multiply: open multiple bank accounts or not?
The usual temptation is to open separate accounts for businesses situated in various locations so they can run independently. These may often be branches of the same enterprise. The main concern is with the operation of various expenses and payroll.
Experts, however, suggest that you retain a single bank account despite the expanding size of the business.
Benefits of maintaining minimum bank accounts
It is cost effective to maintain a single bank account for the various business portfolios. It is also easier to operate when everything is routed through a single bank account for the case of a consolidated business. The branches in various locations are run under the same corporate entity. Your operation will only require a single employer identification number.
Many companies opt to have separate bank accounts for businesses located at different places that are independently operated. The argument here is that you will manage to reduce mingling of funds. Each company with its own identification number will be filing its tax return separately from one another.
Contrary to that paradigm, maintaining a common bank account for such scenarios is not a bad move. In fact, running such separate accounts will be more of a hassle for as long as all these companies belong to you.
It will be costly in terms of banking fees, processing of accounting details and production of checks. For these reasons, it is advisable that you still maintain a single account even in the event of separate independent companies in different locations.
This enables you to take advantage of the cash management services of the bank. It should be able to track all expenses and revenues at each outlet. This allows you to concentrate all the banking transactions of your business.
As a way to identify checks and deposit slips for each separate location, these documents ought to be coded. The same underlying principle applies to separable merchant terminals.
The accounting software for such cases can also utilize the same principle. The aim here is to simplify the process of tracking financial information and produce accurate reports for each location.
As a major advantage with a single account, you have only one balance to track. You, therefore, have your work reduced on managing payments.
Sometimes the bank will require a minimum balance on all business accounts. This means your minimum balance is reduced when you maintain a single account. You only have a single minimum balance to maintain. You are advantaged if this balance is bigger since the bank allows you the privilege to negotiate on service fees.
So, if you are contemplating having several bank accounts for your businesses, then you’ll find this information particularly useful. You may begin by asking your bank to give you an analysis of different scenarios and then bring your accountant in to help you determine what will best work for you.