Freelancing carries a lot of responsibility. You’re in charge of every aspect of your business, from what work you do and how you do it, to how you manage your accounting and finances. It can feel like you wear a dozen hats, particularly as your business grows.
For this reason, it’s important to do what you can to simplify things for yourself. One of the best ways you can do this is by opening a business bank account. This simple process creates a ton of opportunities to streamline your business and make your life easier.
Simply put, a business bank account is a checking or savings account that’s specifically designed for business use. Using a business account helps in a number of ways:
Keeps your business and personal expenses separate
Makes expense tracking easier
Simplifies tax calculations
Presents a professional appearance to clients
The main difference between a business account and one intended for personal use is the range of business-focused features that often come attached to these specialty accounts. These features can include:
Bookkeeping tools and automation
Credit card processing
Tax and expense tracking
These extra features can make life easier for freelancers or small business owners. Ideally, you can get all of these in a single solution that integrates directly with your banking, making your financial processes seamless.
Let’s look at some of the practical ways having a business bank account can benefit your freelance business.
A business checking account is important because it enables you to separate your business and personal expenses. This is important because you can write business expenses off as tax deductions, even if you’re operating as a sole proprietorship.
However, if your business and personal expenses come out of the same account, it can be difficult to keep track of which is which—and that makes accurate reporting tough. 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 the business expenses.
Having a separate business account eliminates this issue. When everything is listed in a single 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.
This separation can also be important in the event 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.
Finally, keeping finances separate makes it much easier to calculate your revenue and profit. For a freelancer, your expenses may be reducing your personal income in a very direct way, so being able to keep a close eye on them is useful.
Dealing with your own taxes is a reality for many, if not most, freelancers. Even if you have an accountant to do the heavy lifting, you’re still responsible for keeping things tracked and categorized accurately. This can be a time-consuming process.
Additionally, once you’ve determined how much you owe, you have actually to make the payments. The IRS technically requires quarterly tax payments, and there is a penalty (albeit small) for not paying by these deadlines.
Quarterly tax periods and payment deadlines
Payment Period: January 1 – March 31
Deadline: April 15
Payment Period: April 1 — May 31
Deadline: June 15
Payment Period: June 1 – August 31
Deadline: September 15
Payment Period: September 1 – December 31
Deadline: January 15 (of the following year)
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. Found, for example, automatically logs all your tax-deductible purchases, calculates real-time tax estimates, and enables you to pay directly from the app.
Business bank accounts like Found often come with a separate tax savings account that will automatically withhold the correct amount from deposits so you can save as you go.
In order to get a comprehensive overview of the health of your business, it’s important to see all your transactions in one place. Having a single account that everything passes through makes this possible.
The main advantage of seeing everything in one place is the ability to get a high-level overview of your business. This is especially valuable now, as many freelancers and small business owners look to recession-proof their businesses.
This is another area where the right software 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.
While the quality of your work is extremely important, it’s also important to present a professional appearance to clients. This isn’t about tricking people into thinking you’re something you’re not—it’s about being professional and showing people the authentic side of you and your business.
A business banking account can come with perks like a personalized debit card, invoices with your business’s name, and other branded items. These may seem trivial at first glance, but when taken together can provide a lot of extra evidence to your clients that your business 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.
Paying for all your expenses from a single account makes tracking them trivial—they’re all right there. If you’re using accounting software that connects to your bank account, it can also automatically pull these transactions and enter them into your ledger.
This also makes categorizing your expenses much simpler, which is important for tax purposes. Since you can take your expenses as deductions, the IRS has strict requirements for what and how you report, including specific categories of expenses that are eligible for these deductions.
Eligible expense categories include:
Some accounting software (like Found) can automatically categorize your expenses as it pulls them from your bank account. This feature can save a ton of time and ensure that your expense reports and taxes are accurate. For example, if you purchase a camera lens for a photo shoot, Found can automatically categorize it as an equipment purchase and calculate your tax write-off.
For freelancers, the phrase “time is money” rings very true. Any time you’re not doing client work, you’re not earning money. For this reason, it’s important to minimize the amount of time spent on administrative tasks (like logging and categorizing expenses or creating invoices) so you can spend more time doing the work that pays the bills.
Having a business bank account helps save time in a few ways:
Everything is in one place, so you don’t need to spend time hunting for transactions across multiple accounts.
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. While it might seem like adding another bank account to the mix will complicate things, the opposite is actually true. It makes things simpler and keeps you from hours of busy work.
Accounting software is powerful and can save tons of time. However, 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.
For example, you could pay for an expensive and complex system to keep track of your expenses. On the other hand, a business bank account (like Found) can automatically pull and categorize these transactions for you.
Another example is tracking your taxes. You could pay for software to help sort out how much you owe. However, Found can automatically track how much you owe on taxes and even enable you to make the payment right from within the app.
Whether you’re brand new to freelancing, or you’ve been at it for years, it’s never too late to streamline your business. One of the best ways to do this is to open a business bank account. While it might seem like another account will complicate things, the reality is the exact opposite.
If you’re looking for a business bank, check out Found. Our all-in-one banking solution offers a business account, powerful invoicing tools, and time-saving bookkeeping features. Try it out today—it’s smart, simple, and free to sign up.
This material has been prepared for informational purposes only.
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