Before your start-up becomes functional, it is important that you open a corporate bank account. A corporate account is essential for separating your personal funds from your business banking activities. According to Investopedia.com, Business Banking is defined as a company’s financial dealings with an institution that provides business loans, credit, savings and checking accounts specifically for companies, and not for individuals. Many business owners may go as far as using a different bank for their corporate account to ensure funds are not being muddled up. Furthermore, most companies require that you open a corporate account for the value proposition of your business to become valid. Here are a few reasons why it is essential to open a corporate account:
Safe Accounting
As a start-up, it is vital to account for every naira to effectively help you track your business activities and analyze what expenses to cut down on, what areas need more investing, what revenue stream yields the highest income, and so on. It is also important to keep all invoices and receipts, to account for every business transaction carried out using the corporate account.
Professionalism
How your business funds are managed, directly impacts the corporate image of your company. If you are writing a check to a supplier or receiving money from a customer, it is important for checks or deposits to be addressed to your business name. Additionally, it will be a hassle managing the inflow or outflow of cash, if your business and personal finances are not kept separate.
Managing Expansion
With a business account, you may choose to allocate money to pay employees as your staff increases in size. You can also use your corporate account to partner with other businesses, or use it for mass payments. Whatever the case is, it is convenient to transact transparently to monitor growth in your venture.
Loan Accessibility
As a start-up, potential investors must perceive that your venture is running smoothly and effectively. Whether it is a bank loan or a private equity investment you are aiming for, opening a corporate account will increase your chances of accessing loans. This is because your investors can better track how the business has been running till date, before making any long-term commitments.
Tax Audit
When your start-up becomes operational, there is need to open a corporate account to keep your accounting transparent for the purpose of external auditing. It will determine whether or not you should be paying taxes to the government. It will also help auditors to determine the precise amount of taxes your business should be paying, based on the net profit being generated by your company.
Requirements for Opening a Corporate Account in Nigeria
Different banks in Nigeria have their specific requirements for opening corporate accounts. Below are the basic requirements for opening a business account in any Nigerian bank:
– The bank’s application form
– A valid proof of Identification (ID)
– A valid proof of address (e.g. utility bills not exceeding 3 months)
– Two referees that own current account from any bank in Nigeria
– Two passport photographs
Your personal savings account is meant for your personal transactions and your corporate account is formal, official and meant solely for your business transactions. The effective management of business finances will take your start-up from its inception to a successful destination.
