Personal banking refers to the banking services available to individual customers. Personal banking is through local branches of banks. Banking services for personal banking vary widely. Explore a diverse range of financial solutions tailored to meet your individual needs. From opening various types of bank accounts and accessing credit card facilities to securing mortgages, personal loans, and lines of credit, we provide comprehensive options. Additionally, our offerings extend to facilitating convenient car purchases through competitive interest rates and ensuring financial protection with various insurance options.
Along with personal banking services, banks provide many other services. For example, ATM services, online banking services, money/credit transfer to different bank accounts by way of funds transfer, utility bill payments, phone banking, 24-hour ATM services to withdraw cash, retirement planning services, insurance services, financial advising, and many other services are provided by banks. In today’s world, financial institutions offer a few personal banking services, like insurance companies that give loans, mortgages, and retirement plans.
Small businesses indicate private companies, business partners, and single proprietorships. There are fewer employees in small businesses. Annual revenue is also less than that of medium-sized/regular-sized businesses.
How Small Business and Personal Banking are Mingled
Many adverse things may happen when an entrepreneur or financier mixes his personal account with a business account. Business bookkeeping will also become mingled with personal banking.
Entrepreneurs face many challenges and decisions in setting up a small business, running business operations, and managing finances. They must decide where to start their small business to generate enough income and annual revenue. If a person wants to open a bakery, they will choose a place where customers can access it quickly, and many other things are focused on selecting a location. While making these decisions, the entrepreneur often uses his account to invest money into the business as investment capital.
Using their account creates a sticky business situation. The entrepreneur’s account will also be mingled with other business bookkeeping and accounting components. It is how personal banking associates with small-business bookkeeping and accounting. From the entrepreneur’s point of view, it seems easy to use their bank account to fund their business finances. Small business owners are usually inexperienced in starting and do not know the adverse effects this mingling of personal banking and small business can have on them and their businesses.
Entrepreneurs do not realize the long-term consequences of mingling personal banking and small business bookkeeping. They think it’s better to save time on paperwork and go to banks to open new accounts. They believe they have to invest a small amount of capital to start a small business, which can be quickly done with their account. That’s why many use their checking bank account for their business. This mistake is made mainly by beginners who want to invest their hard-earned money into a business to generate profits.
Adverse effects of mingling Small Business and Personal Banking
- Small business owners who mix personal banking with business operations do not adequately check and balance accounting statements. They do not productively interpret cash flow and financial statements with the balance sheets.
- Business bank accounts are beneficial for business owners. They can get immediate loans and financial services when they need them. Credit and debit card payments and cash and check services are more accessible. Customers use these facilities and come back to the same business when they are convenient.
- Tax deductions can be made accurately. However, if the personal banking account is mingled with the business account, the tax will be charged at a higher percentage.
- Tax is paid on time through business accounts. Cash flow statements must only refer to business operations, not personal banking. Thus, bookkeeping functions are made more accessible.
- An audit is for business accounting, but when both accounts (personal and business accounts) are intertwined, income and expenses are misreported, which affects the audit process as well.
- If a personal credit card is used for any business operations, a log of all business operations records must be kept. This is a complex and time-consuming task, but it should also be error-free. Mingling personal banking and business bookkeeping makes it challenging to track the records.
- As the business grows, financial needs will increase, and it will eventually need a separate business account. A different business account gives a clear picture of business functions, and the business’s credit history will be clear.
Conclusion
A separate business account prevents misinterpretation of accounting statements and increases the credibility of the business. A separate account will eventually be required when the business grows from a small investment.
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