eing a freelancer is a magical thing. You have the freedom to choose your projects, set your hours, and work from anywhere in the world. Being a freelancer also makes you a sole proprietor, meaning you operate as a small business. Once you decide to freelance, it’s time to start thinking about how you are going to manage your business finances. The best way to do so is by opening a business bank account, which helps keep your finances organized in an easy and convenient way. We are covering five reasons why you need this type of account if you’re a freelancer.
Background:
There are 56.7 million people doing freelance work in the U.S., more than a third (35%) of the country’s workforce. The same research found 51% of all freelancers say no amount of money would convince them to take a traditional job. If you’re part of this group, you chose this path because you want the freedom and flexibility to work on your own terms. This should be the same when it comes to business banking. Freelancers sometimes make the mistake of putting their personal and professional finances in the same place. Since you are now running a small business, you need to separate the two with a business bank account. Many benefits come when you make this decision, which makes it easier to track your finances. You will also look more legit, and you will have fewer restrictions on the choices you can make. Keep reading to learn how to make the most of your life as a freelancer with a business bank account.
1) Separate Your Business from Personal Finances
You need to be organized to run a successful freelancing business. However, it’s challenging to keep your finances straight unless you have the right system in place. A business bank account ensures that your personal transactions are in a separate place. This type of account makes it easier to keep tabs on your freelancing revenue, expenses, and profit. A business banking platform like Novo shows you how much you spend and how much you earn in the same dashboard. It also does the math of letting you know what your cash flow is for any particular month.
2) Filing Your Taxes as a Freelancer Is Easier
We all know filing your taxes can be a headache when you’re a freelancer. You have to go through all your paychecks and figure out how much you earned. This process sometimes includes looking at dozens (or even hundreds) of payments via direct deposit, PayPal, and the like. By separating your business and personal finances, a business bank account also makes it easier to file your taxes. These accounts have bank statements that let you know what your work income is for each month. If you don’t file your taxes correctly, the IRS could hit you with a penalty.
You can also save money by deducting your expenses on your taxes, which are easier to track with a business account. Besides, you won’t have to spend money and time on a tax preparation professional. The Novo app provides freelancers with monthly bank statements that include your income and expenses for the period. It’s easy to use these statements to calculate your taxes.
3) A Business Bank Account Offers More Flexibility
As you may already know, freelancers may send and receive a lot of transactions throughout a month. You will want more options for making transactions once your small business starts growing. With a business bank account, you can collect receipts, write checks, and accept credit card payments. Having this type of transaction flexibility is why many of you chose to become freelancers in the first place. A business bank account may also have fewer limits than a personal one. The latter often has restrictions on the number of transactions you can make. There may also be limits on the size of your transfers, hampering your financial freedom as a freelancer.
Novo keeps your financial goals in line with no transaction fees and no minimum or maximum balance. We also offer a debit card with no ATM withdrawal fee, domestically or internationally.
4) Show the World How Professional You Are
How you present yourself is as vital in freelancing as it is in the rest of the business world. You want customers to see you as a professional, and a business account helps you achieve this. Writing a check from your personal account doesn’t make you look legitimate. On the other hand, sending and receiving payments from a business account does. Over time, this type of account helps you build relationships with customers. It shows them that you’re in the freelance game for the long haul, which could increase your chances of getting repeat business.
The Novo app has a tool to make you look more professional, as you can deposit checks instantly. Use your device’s camera to scan a check and receive your payment on the spot. Doing this lets your customer know you accept payments in many ways, giving them more flexibility.
5) Link Up With Other Business Banking Software
The right business banking account serves you by operating as more than a checking account. It is your financial focal point that paves the way for you to take care of all your money-related matters as a freelancer. This type of account does this by linking up to other banking software.
Services such as Plaid connect your business with other accounts you have. It links up with your personal account if you need to withdraw money to pay for rent, or take care of other personal expenses.
The Novo app offers this integration, as well as others such as Xero. Our app is connected with Xero, which is an online accounting software where you can create invoices, email purchase receipts, and more. This integration makes it easy to combine your business transactions with these features. And much like Novo, it is designed for small businesses.
The Takeaway
We love the initiative, passion, and freedom freelancers have. You have to be organized to succeed as a sole proprietor, and a Novo business bank account helps you keep your ducks in a row. It also gives you the flexibility to send and receive payments in many ways without having to worry about fees.
