So, I’ve got a big confession to make…

After nearly 3 years in the business of being Lazy Owl, and also being a CPA, and also BLOGGING about good financial practices for small businesses…

I just now finally opened a business bank account for myself.

Yes yes, throw your stones at me now, I deserve it. Many people agree that opening a separate business checking account for your creative business should be one of the very first things you do when starting out. And I agree. But I didn’t call my business Lazy Owl for no reason people!

Honestly, there’s really nothing wrong (or like, illegal) about using your personal checking account for your business, as long as you’re operating as a sole proprietor. However, there’s (at least) two major benefits of having a separate business account for your Etsy shop or online creative business:Anyway, it’s been on my to-do list for quite some time, and now I’ve checked it off. Here are my thoughts on the process, if you are out there wondering if you need to open a separate bank account for your creative business.

1. You can accept and deposit checks made out to your business name, write checks in your business name, get a debit and/or credit card in your business name…and just plain do business and what not in your business name.
2. Your personal and business cash inflows and outflows are not “comingled” for tax & financial purposes.

First, your business checking account can be in your business’ name obviously. This is something that can’t be done with a personal account (most banks won’t let you at least). So now, if you ever get a check made out to “Lazy Owl Boutique”, you can actually deposit or cash it without the bank being all confused about it, or even worse, rejecting it outright.  This means you can also get a debit and/or credit card in your business’ name and checks with your business name on them. Fancy!

Second, trust me when I say, you have to be very diligent and organized if you are operating your business out of your personal bank account when tax time comes around… or even just to do any financial tracking for your business in the meantime. Having only one account means digging through a lot more transactions to figure out what income and expenses belonged to your business versus your personal life. This means a lot more time determining which expenses are deductible and which are not. Having an account dedicated to just your business means you don’t have that problem. You can simply copy or download all of your transactions and call it a day. This is also really good news because it means if your tax return is ever audited by the IRS, you have some really good documentation readily handy.

But really, there are lots of other intangible benefits than just the two above. Here are just a few off the top of my head…

• I can save mucho time by downloading bank transaction data directly to my financial spreadsheet (or Quickbooks, Outright, Mint, or other financial software you might be using). With direct data download from my business bank account, Etsy account, and Paypal account, Imagine all that number-crunching analysis I’ll be able to do now without having to type transactions in one at a time!
• I spend a lot of time during tax season finally inputting various miscellaneous expenses from the entire year that I can now stay on top of throughout the year. Since I am constantly buying jewelry supplies, having all my expenses in one place without having to filter out my groceries and what not will be splendid.
• Here’s a great one – I will have a much better grasp on my day-to-day cash flow and income/loss than I did previously. Now I can simply check the balance of my bank account, rather than take an afternoon to update my profit spreadsheet by entering sales and expenses line-by-line.
• I also will finally be able to have a Paypal account and debit card devoted solely to my business. Better expense tracking there as well.

Bottom line…this saves me a lot of time and energy and encourages me to actually deal with my finances, instead of pushing them aside day after day because the work is too time-consuming and tedious. If me, the accountant, has trouble finding the stamina to work on my financial paperwork, I’m sure a lot of artists out there don’t enjoy this task either!

Financial gushing aside, there are some downsides to opening a business checking account that you don’t have with personal checking accounts…mainly, fees. Most banks require a minimum monthly balance or your account will be charged $10-$15 a month. Also, if you have more than a max number of transactions each month (usually around 150-200), you are charged a fee per transaction. If you plan and monitor your account carefully though, you can usually avoid these charges, and I believe the pros outweigh the cons. Trying to avoid these extra fees has a silver lining – it encourages you to monitor your money more frequently and makes you more aware of your finances on a day-to-day basis, something a lot of us creative peeps have trouble with.

I used this helpful tool at nerdwallet.com to find a bank in my area that fit my needs the best (like a phone app for mobile check deposit, yes please!) and charged the lowest fees. I highly recommend it. There are also some online-only small business banks that you can check out, though I couldn’t find any that seemed to have solid positive reviews thus far.

1. So, there you go. Hopefully this encourages you to bite the bullet if you haven’t already gotten yourself a checking account for your creative business. It’s just another step, and one that’s not too painful, on the road to becoming a thriving creative business and a financial success.