Photo Credit: Eflon
You jumped through so many hoops to start your cleaning business. You filled out countless forms for your cleaning business name, cleaning business license and registered to pay taxes to your state, county or city.
Now you have a registered name and license for your business. You are set up to pay your state, county or city tax. You can hardly wait to get started and sign up new customers.
You’re all ready to go…or are you?
There’s still one more step to setting up your business. Before your first walkthrough, before you earn your first dollar, make sure your business bank accounts are set up and ready to fill with your hard-earned money.
Why Business Bank Accounts?
It might seem like a smart move to use one personal bank account for everything. All of your income goes into one account and comes out of one account. You then use one account for both business expenses like cleaning supplies and personal expenses like groceries. Right?
No, not really. Without business bank accounts, to manage and hold your cleaning business income, things can get messy pretty fast. Especially at tax time. Then you can find yourself spending long, tiresome hours separating business from personal expenses.
With a business bank account, you get a clean financial record at the end of the year because your business finances won’t be tangled up with your personal finances.
It helps to think of your cleaning business as a separate household. Your business household earns its own money, keeps its own bank accounts and pays its own expenses.
As the owner of the “business house”, you can pull income from your business property. A percentage of your business income can be transferred to your personal account through an “owner’s draw”. You can pull your owner’s draw out your business account weekly, bi-weekly or monthly.
In this way, your “personal household” expenses are separated from your “business household” expenses. Plus, you avoid the temptation to spend willy-nilly from one all purpose checking account “because that’s where the money is…”.
Opening business bank accounts for your cleaning business means you have to decide what banking services your business will need, now and in the future. From there, you need to do a bit of research, get your paperwork together and set up your accounts.
Consider starting your search for a business banking partner with your current bank or credit union. Your relationship with them may make it easier to open an account and get the services and support you want for your business. Some services you may need or want include:
Free or low cost checking accounts and savings accounts
A basic set-up for many self-employed cleaning business owners is a business checking account with an attached business savings account, checks and a debit card.
Some banks and credit unions have free checking account plans. In many of those free plans, you have to keep a set amount known as a “minimum balance” in the checking or savings account at all times to qualify. Drop below the minimum amount and you are charged a fee for the month. When looking at bank account plans, make sure you know what “free” really means.
It is important to find out exactly, what fees are charged, when they are charged and how much. Some common fees to ask about before setting up an account include:
• Monthly account fees
• Minimum Account Balance fees
• Transaction fees
• Cash deposit fees
• ATM fees (for ATM transactions at out-of-network ATMs)
• Wire transfer fees
A convenient network of ATM and bank branches
Does your bank or credit union have plenty of Automated Teller Machines (ATMs)? How hard is it to get to the bank’s ATMs? Do you have to drive long distances to get to the nearest branch or use your banks machines?
When your bank branch is hard to reach, it can be a pain to do routine things like set up new accounts, take advantage of special services like getting a cashier’s check or work through problems that happen in every account from time to time. At least two times in the past, I have chosen credit unions that have branches and cash machines in grocery stores close to me. Banking and shopping in the same location is pretty convenient.
Online and phone services
If you prefer to do everything online, how easy is it to use your bank or credit union’s online or mobile (phone or tablet) services? Can you set up an account online? Can you make deposits online?
Most banks now offer a service where you can deposit checks electronically. This service is called remote deposit or remote deposit capture. If you accept checks in your cleaning business, it’s a good idea to ask your bank if they offer this service so that you can easily make check deposits without needing to leave your office.
24/7 phone services can be vital. On one Thanksgiving Day, someone tried to steal from my business checking account through a hacked debit card number. My bank called me on that holiday to alert me about the problem. They then shut down the hacked debit card and issued a new debit card in a matter of minutes——all by phone…on a holiday!
A merchant services account
If you choose to accept credit, debit and charge cards on certain payment platforms like Authorize.Net you will need to open a special, separate merchant services account in a bank or credit union.
Most residential house cleaning businesses can operate just fine with a payment processor like PayPal, Square or Stripe. You can set up a payment page on your website and manage payments with your phone. Some house cleaning businesses also get paid through payment exchange apps like Venmo.
Payment processing companies sometimes provide extras like apps that let you use your mobile phone to accept credit card payments on-the-go. Just be aware that fees for these extras may be similar to the costs of merchant services account fees. You’ll still need to connect any payment processor to a business checking account to receive payments.
Works with your bookkeeping or accounting software
If you plan to use popular accounting software like QuickBooks, FreshBooks, Xero or Wave, make sure you can connect your business checking account to your bookkeeping software. Then you can automate some of your financial records and save yourself hours of time.
Support for your future business needs
Be sure to find out if the bank or credit union you choose can grow with you. As you become more established, your business may need a credit card, a line of credit or a small business loan. Find out if your bank offers those services for sole proprietors, general partners and limited liability companies (LLC’s).
What You Need To Get Started
Whether you start set-up your business accounts in person or online you will need this paperwork:
• Personal ID: Driver’s License or Passport plus Social Security Number
• Your contact information, including your business’s phone number, email address and website
• Business tax ID – or an EIN
• Date business was formed
• Business license
• Your business address which can be a P.O. (Post Office) box if you work from home
• A business name document such as a DBA (“doing business as”) certificate, “Fictitious Business Name” certificate, “Assumed Name” certificate, or Trade Name certificate based on what your state, county or city issues for business names different from your personal legal name
• Personal information requested from the business owner will vary from bank to bank
• Business tax ID (An EIN is strongly recommended)
• Date business was formed
• Partnership Agreement showing business name and name(s) of partners
• Your Partnership contact information, including your business’s phone number, email address and website
• Country and state of legal formation
• Country and state of primary business operation
• Legal business name and filing documents such as a DBA (doing business as) certificate, fictitious name certificate, certificate of trade name or assumed name certificate
• Personal information requested from the business partners will vary from bank to bank
Limited Liability Companies (LLCs):
• A copy of your LLC’s Articles of Organization.
• Your federal EIN
• Your LLC contact information, including your business’s phone number, email address and website
• Country and state of legal formation
• Any required business licenses from your county or city
Business Savings Accounts
The other business account you will need is a business savings account. With a business savings account, you’re able to set aside portions of your business income for future use, like taxes, supplies and equipment. You can also separate business savings from daily business funds, making day-to-day financial management easier.
The savings account is where you can save for tax payments such as federal and state self-employed tax, sales taxes and use taxes. The savings account can also be broken down into sub-accounts.
When you open a business savings account, in addition to a business checking account, you can build a financial cushion in case of an emergency. Then you’ll have some cash to survive if you can’t work for a short period or get hit with an unexpected bill.
The Benefits Of A Separate Business Account
Opening a separate business bank account is a good decision for all cleaning business owners. A business account simplifies record keeping, helps you track your business income and expenses and saves you a lot of time when taxes are due.
A separate business bank account can help you develop one more system in your business that can be automated. Systems, especially automated systems, help you run your business and reach your goals. Whether you want to keep cleaning solo, with a partner or you want to go full tilt into building a cleaning business empire, getting a separate business bank account building is a good first step. A step that puts you on the road to financial independence.
Get started today!
How easy or hard was it for you to set up your business bank accounts? Share your first banking experience with others in the comments below. ⬇︎
Woman with questions: Dan Morgan 12
Folder with papers: Evelyn
Stacks of coins: ArmyDre 2008