Congratulations on your new sealcoating business! Now that you have obtained licenses, permits, and financing, the only thing left to do is open a business bank account and you're good to go.
But it's not just one business bank account.
You need at least five bank accounts to ensure that your business runs smoothly and you can track every cent minus the hassle.
But why should you open multiple bank accounts for your business, and what are these for? Find out below.
Income bank account
This is your primary bank account for your asphalt maintenance business and the first bank account you should get. Take note: every sale you make should be deposited in your income bank account first. Then— and only then—can you send a set percentage of your income to your other business accounts.
If you already have a personal savings account, then you might be wondering why you should still get a separate bank account for your business. Is it necessary?
The short answer is yes, it is necessary. It's always a good idea to have a separate business bank account, so you don't dip into your income and profits for personal expenses or dip into your savings for business expenses.
Another advantage of having a separate business bank account is that it can make your business look more legitimate and allows you to facilitate credit card payments.
A separate business account makes tax preparation easier for you and your accountant. It can also help you sort out your finances in case you're entering a business partnership or planning to incorporate your business.
The question remains: is it better to get a regular business savings bank account or a business checking account?
For your income bank account, we recommend that you sign up for a business checking account that comes with 0 or low monthly fees and does not have minimum balance requirements. Another thing you should look into when choosing a checking account is whether it comes with unlimited no-fee transactions so you can save money.
Operating Expenses (OpEx) Bank Account
Operating expenses (OpEx) are business expenses necessary for your company's day-to-day operation. These include:
- Accounting fees
- Cost of equipment repairs
- Insurance costs
- Legal fees
- License fees
- Property taxes
- Purchase of asphalt maintenance equipment and supplies
- Office supplies
- Research and development
- Utilities and more
Having a separate bank account for operating expenses gives you a crystal-clear view of your sealcoating company's financial transactions and helps you manage your daily budget with ease.
It also helps you untangle knots when it's time to file your taxes as records of your operating expenses are already separate from your primary business account and your personal savings account.
Net profit bank account
Net profit is the amount that remains after all the cost of goods sold and all the operating expenses have been deducted from your gross income.
To keep track of your business profits, we recommend that you deposit them into a separate bank account. Having a separate bank account allows you to determine whether you’re making a profit, breaking even, or operating at a loss.
You don’t have to get a checking account for this — a regular business savings account will do to keep track of your net profit.
Tax bank accounts
You should also get a separate bank account for filing taxes, and we recommend that you use a checking account for this. A separate bank account will make it easier for you to prepare your business tax returns, especially if you do it yourself.
Owners compensation bank account
You built this asphalt maintenance company to gain financial freedom for yourself and your family, so it's only proper for you to pay yourself. To do this, you have to have an owner's compensation bank account.
You have two options to compensate yourself with your company's profits. The first one is the draw method. In this method, you can draw a certain amount from your earnings. It doesn't matter if it's a small or a large amount or whether the business is doing well or not — you're basically the captain of your own ship here so pay yourself with the amount that you see fit.
Another way to compensate yourself is by using the salary method. Every month, you draw a certain amount and pay yourself like one of your employees.
We have plenty of sealcoating business resources for you here at the Asphalt Kingdom blog! If you have any questions about the ins and outs of running an asphalt maintenance business, or you want to know more about our sealcoating and crack repair products, just reach out to us at 1-866-399-5562 or send us a message at email@example.com