A good number of bank customers are of a misconstrued notion about the message their bank statement sends to a lender or other interested institutions. Most believes a fat bank account balance may put them at an advantage when statements are presented when and where it is needed. Other believes huge balances in the account over a period of time is an indication of a business account that is well operated.
Still, there are some bank customers who believes that the money deposited in your account should be your savings after you must have taken care of your business expenses and made payment to your supplier/s from cash sales.
What is however true is that whatever the manner in which you operate your bank account. It portrays a meaning to the lenders, and other institutions that may require your bank accounts for whatever reasons.
A business bank account shows you are in business.
Business bank account shows that you have a business banking relationship and you can approach your bank as a business and not as an individual.
This article will focus on business accounts (current or checking account) and the messages the characteristics of your account send to interested parties when they look at it. But before we discuss what your bank account says about the kind of business you do, here are 2 definitions of bank account.
The Wikipedia defines a bank account as “A bank account is a financial account maintained by a bank for a customer. A bank account can be a deposit account, a credit card account, a current account, or any other type of account offered by a financial institution.”
The Financial Dictionary defines a bank statement as “An agreement between a bank and a person or institution, whereby the bank agrees to hold money and/or other assets on behalf of the other party. What the holder may do with those assets depends upon the nature of the account. In a checking account or a savings account, the bank holds money and pays the client a certain percentage in interest. This payment gives the bank the right to lend the money to other clients or invest it within the confines of law and banking regulations. However, the client has the right to withdraw the total amount of money on demand.”
Here are what your business bank account says about your business
When you operate a business bank account opened in your business name or registered company, it shows that you are not just a petty trader but a business man or woman. Using a personal account for business may not be a bad idea if you are a starter in business or a petty trader but if you are planning to be big and want records of your business growth with you bank, you should register a business and open a business bank account. You should also ensure all your business proceed passes through your business bank account.
It is only with a business bank account that you can approach your bank as a business for finance and other business banking products, otherwise you will be seen as a salary earner or a petty trader.
A very busy bank account.
A business bank account with regular inflows and outflows and little or no balance in the account shows that you are stretching your cash flow and you may need to inject more fund into your business to take full advantage of your immediate market.
This can only be true if you are not cleaning out your bank account for reasons other than that of your business. If you clean out your account for savings, capital projects, stocking of raw materials more than what is needed for a production cycle or for other lifestyle financing other than your business, then this assumption may not be true for your business.
Huge balances in your business bank account.
Large amount of money in your business account with regular and daily inflow and outflow shows that you have a business that is very profitable, you are taking full advantage of your market and may need to expand.
Large balance in business account with no regular transactions may indicate a business that is waiting to take advantage of opportunities or no longer in business if it is not a new business venture.
Occasional large lodgment and large outflow
This may be an indication of a company in real estate or businesses other than fast moving consumer goods. It may also be an indication that that bank account is not your major bank account and that you warehouse money in the account for some reasons and use the fund when needed.
Regular tranches inflow and large outflow
This is an indication that you are either a manufacturer or trader in Fast Moving Consumer Goods (FMCG). Where your customers or distributors pay regularly into your account and you pay your manufacturer for stock replacement or for purchase of raw material as the case may be.
This is also applicable to the account of a trader who has regular inflow or cash deposit and large outflow to replenish stocks.
Occasional/ Regular Large inflow and tranches outflow
This may indicate a service business or contractors of government or other organizations. Large inflow are after for contract executed or mobilization for contract awarded while tranches outflow May indicates payment inputs and wages for workers. For service companies, large inflow may indicate payment for service rendered and tranches outflow may indicate payment to workers and others engaged in the process of excusing the contract or services.
