The Shutdown of Silicon Valley Bank really shows the importance of having multiple bank accounts for your international business. As a business owner, managing your finances is one of the most crucial aspects of your business. It is essential to keep track of your cash flow and transactions to ensure your business is profitable and sustainable. One of the ways to achieve this is by having multiple bank accounts for your company. Moreover, As the recent shutdown of Silicon Valley Bank played out, having multiple bank accounts for your company is now more essential for ensuring financial stability and security.
What Happened to Silicon Valley Bank?
Do you know that there is no more Silicon Valley Bank? If this is new to you, just follow closely. Silicon Valley Bank (SVB) was a well-known commercial bank that had its headquarters in Santa Clara, California. Its services cover nearly half of the United State’s venture capital-backed technology and life-science firms and was the 16th largest bank in the US.
However, on March 10, 2023, regulators shut down Silicon Valley Bank (SVB), because it was unable to fulfill withdrawal requests from depositors. Its holdings are now managed by the Federal Deposit Insurance Corporation (FDIC).
This decision was made after the bank incurred a loss of about 1.8 billion dollars. Now, imagine you were running your tech business on one bank account with SVB, and then you woke up to such news. Not a good thing at all!
So, in this blog post, we will discuss the importance of having multiple bank accounts for your business and how to go about it.
Why is Having a Multiple Business Bank Account Important?
As a business owner, opening multiple accounts can be beneficial for managing your business’s finances and achieving your financial goals. Below are some of the reasons why you should consider having multiple business bank accounts:
- Risk of Bank Closure
The shutdown of Silicon Valley Bank has served as a reminder that no bank is too big to fail. While banks are typically a reliable place to store your funds, there are risks associated with having all of your business finances in one account. For example, if your bank were to suddenly close or experience a significant financial issue, you could lose access to your funds. This can be catastrophic for your business and could lead to missed opportunities, damaged relationships with vendors or employees, and even bankruptcy!
You can spread out this risk and mitigate the impact of any one bank’s closure and ensure business continuity; if one bank were to experience issues, you could still access some funds through the other accounts.
- Better Security
When it comes to your business’s financial security, it’s never a bad idea to be extra cautious. As a business owner, you must be able to anticipate evil. Having multiple bank accounts might increase the security of your business by limiting the harm that can be done if a hacker acquires access to one of your accounts. That means; if a hacker gets access to one of your bank accounts, you can still access funds for urgent transactions while sorting that. Kindly note that the services of a Corporate Service Provider like FirmEu can help you in tracing a hacker.
Moreover, you can also use different accounts for different purposes, such as payroll, vendor payments, and tax payments, which can help prevent fraud and other financial crimes.
- Better Cash Flow Management
Another reason to consider having multiple business accounts is to improve your cash flow management. By separating your accounts by different purposes, such as payroll, overhead expenses, and inventory, you can keep better track of where your money is going and where you need to make adjustments.
Additionally, having separate accounts can also help you avoid accidentally overspending in one area, as you’ll be able to see your account balances at a glance.
- Maximizing Interest and Rewards
Having multiple business accounts can help you maximize your interest and rewards potential. By having accounts with different banks or financial institutions, you can take advantage of different interest rates and rewards programs to earn more money or receive perks like cash back or travel rewards.
Some banks also offer business-specific accounts with perks like lower fees, higher interest rates, or free checks. By having multiple accounts, you can compare and choose the best options for your business needs.
- Improved Business Credit
Your business credit score is crucial when it comes to accessing funding or getting credit from suppliers. Having multiple business accounts can help to improve your business credit score by showing lenders that you have a stable and well-managed financial history. With multiple accounts, you can demonstrate that you have a diverse range of business activities, making you a more attractive borrower.
- Improved Tax Management
Having multiple business accounts can also provide advantages when it comes to tax management. By keeping separate accounts for each business or revenue stream, you can more easily track and report income and expenses for each business. This can help you maximize tax deductions, avoid potential tax penalties, and simplify the tax preparation process.
Setting up Multiple Business Bank Accounts: A Step-by-Step Guide
As seen earlier, setting up multiple bank accounts for your company is a smart move that can help you to manage your finances effectively and keep you from potential dangers. You may be wondering; “how do I set up my multiple bank accounts”. Below are the steps you can take:
Step 1: Hire a Corporate Service Provider
This should be the first step towards setting up multiple bank accounts for your company. If you do this, you may not need the other steps. It is to hire a corporate service provider. You may think you don’t need them. However, hiring a corporate service provider can bring several advantages when opening multiple business accounts. Some of these advantages include:
- Expertise and knowledge: Corporate service providers like FirmEu have great experience and knowledge in the field of corporate law and accounting. They can provide expert guidance and advice on the best ways to structure your business and open multiple accounts to meet your specific needs.
- Time-saving: Opening multiple business accounts can be a time-consuming process, especially if you are not familiar with the procedures involved. A corporate service provider can take care of all the administrative tasks and paperwork, allowing you to focus on other important aspects of your business
- Reduced risk: A corporate service provider can help you navigate the legal and regulatory requirements involved in opening multiple business accounts in your State, reducing the risk of mistakes and potential legal issues, mostly for high-risk businesses.
- Access to networks: A corporate service provider often has a vast network of contacts in the industry, including banks and financial institutions. This can provide you with valuable connections and opportunities that may not be available to you otherwise.
- Cost-effective: While there may be some upfront costs associated with hiring a corporate service provider, it can be a cost-effective solution in the long run. By helping you to open multiple accounts efficiently, a corporate service provider can help you save money on fees, taxes, and other expenses.
Step 2: Decide the Number of Bank Accounts
The next step is to determine the number of bank accounts you need for your company. This will depend on the size and nature of your business and your skillfulness in financial management. For those who don’t have the services of a corporate service provider or financial expert, you should look into this. Choose the number of banks that you can handle or manage.
Step 3: Select the Right Banks
The next step is to select the right banks for your company’s needs. When selecting banks, consider factors such as fees, interest rates, and online banking services. You may also want to consider banks that offer special services for businesses, such as credit lines or overdraft facilities. Moreover, for high-risk businesses like a gaming company, You have to get a bank that offers high-risk banking.
Step 4: Obtain the Necessary Documents
To open multiple bank accounts for your company, you will need to provide certain documents to the banks. These documents may include your company’s registration documents, proof of address, and identification documents for the authorized signatories. To know what documents are necessary, contact the bank you want to open an account with. Just like any institute, every bank may have its required documents.
Step 5: Open the Bank Accounts
Once you have obtained the necessary documents, it is time to open the bank accounts. You will need to fill out application forms and provide the required documents to the banks. Once the accounts are open, you will need to fund them.
Step 6: Manage the Bank Accounts
Once your company’s bank accounts are set up, it is important to manage them effectively. This includes keeping track of your transactions, reconciling your accounts, and monitoring your balances. You may also want to set up online banking services to make it easier to manage your accounts.
If you find step too difficult, then you most likely need the service of FirmUE, kindly contact us to get all things done concerning opening multiple accounts::
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As a business owner, you know that managing your finances is critical to your success. One way to optimize your finances and protect yourself from risks is to have multiple business accounts. By following the steps outlined in this blog post, you can set up multiple bank accounts for your company. Remember to work with a corporate service provider, as they can take the stress off you and even do a better job.
Do you need international banking advice for your business? Contact FirmEU now for a free consult!