If you are in the process of setting up a new healthcare business, and are wondering how to organize your bookkeeping, you need to decide whether or not to open a business bank account. Familiarizing yourself with the processes of bookkeeping for private practice can take a bit of time, and there are various decisions that you need to make. Learning how to stay HIPAA-compliant when it comes to online payments, reports, and reviews can be overwhelming but we’re here to help! We’ve done some research and come up with a guide that should point you in the right direction to setting up successful bookkeeping processes.
What is the difference between a personal account vs a business account?
Before you decide on opening up a business bank account, it is first necessary to distinguish between what type of finances this would manage compared to your personal account. I know this sounds fairly self-explanatory, but it’s always good to have a solid understanding of the financial side of things in healthcare.
A personal account (like the one you most likely use currently) is used to manage your own expenses. If you operate as a sole proprietorship, you are not required to open a separate business bank account, as there is (legally) no distinction between the owner and the business. If this is the case, then your personal bank account can be used to manage both personal and business-related finances. On the other hand, a business bank account is used solely for transactions related to your healthcare practice. If you do open a business bank account, you should ensure that these finances are kept separate from your personal account, to avoid any legal issues.
Do private practice business owners require a business account
Whether or not you are required to set up a business bank account is wholly dependent on what type of business you operate. As we mentioned, if you are a sole proprietor you can use the same bank account to handle both personal and business finances. This is because sole proprietorships recognize no distinction between the individual owner of the business and the business in question.
However, if you are registered as an LLC or corporation, you are legally required to set up a specific business bank account. As soon as you begin to handle any type of business transaction, this account should be used. Additionally, if you are using a business bank account, you need to ensure that these finances are kept entirely separate from any personal finances. Mixing the money that goes in and out of these two accounts will not only lead to confusion, but can have detrimental legal consequences.
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What are the benefits of having a business checking account
Even though it isn’t a requirement for all businesses to open up a business bank account, we would recommend this as the best option. Whilst it is important to have a look into the different suitable possibilities for managing healthcare finances, the vast benefits associated with opening a business bank account are hard to overlook.
Lets you keep track of your cash flow
No matter how organized you and your systems are, keeping track of cash flow can be a pretty difficult task, especially if you are new to owning a business. Using a separate bank account for your business finances will help make this process significantly easier, with the additional advantage of giving you a more accurate insight into the earnings of your practice.
Stays on top of your taxes
As you most likely are aware, operating your own business means that many expenses can be deducted from taxes. However, in order for this to occur, you must keep track of your business expenses separately from your personal expenses. When it comes time to file your taxes, you will find that this is a much easier process with a separate business bank account.
Protects your business from being audited
Preparing for the IRS to audit your business is not a pleasant thought for anyone, but it is a situation that occurs, and you need to be ready for it. Having a separate business bank account will allow the IRS to verify your expenses and ensure you are protected during an audit.
Your tax deductions as therapists are maximized
As we mentioned, operating your own business often allows you to claim larger tax deductions. These need to be legitimate, and the best way to do that is by using a business bank account. By processing all of your business-related expenses through the same account, and keeping these separate from any personal finances, you will maximize your tax deductions.
Take advantage of the perks of owning a business bank account
There are various advantages associated with owning a business, and many of these are only applicable if you have a specific business bank account. For example, you can get your own business checks, and apply for business loans and business credit cards. These features are designed to help manage the operations of your clinic, and assist you on your way to becoming as successful as possible.
It becomes easier to protect your personal assets
We mentioned earlier that being a sole proprietor means that your personal assets and business are merged. Whilst this means you aren’t required to separate your finances, it also means your personal assets are at significantly greater risk. Opening a business bank account will separate your finances, providing your assets with a layer of protection in the case of a lawsuit.
Your business address gets listed in invoices instead of your personal address
Whilst this may seem like a small benefit, you would be surprised how refreshing it can feel when you have firm separations between your personal life and your business life. Using your business address has the advantage of appearing more professional and legitimate, and you can use it as the billing address when you make online payments.
Tips to choosing the right bank for your business
If you’ve decided to open up a business bank account (and we think this is the right decision), then it’s time to think about what bank will be right for your business. There are a few different factors that you should consider before making your decision, including:
- Whether the bank takes loans (and if you would qualify for a loan).
- The experience the bank has with other healthcare businesses in your specific industry.
- The online and in-person options offered by the bank.
- Whether the bank can integrate with the systems already in place at your business.
When you are looking into your different options, you also need to be thinking about the short- and long-term goals of your business, and the specific requirements you need from a bank. Finding the right bank can take a bit of time, but it is a process worth deliberating on.
Conclusion
As you can see, there is a vast multitude of benefits associated with having a business bank account. Learning how to manage the financial operations of your business can take a while to perfect, but with the right systems in place, you’ll be on the fast track to becoming an expert! If you are interested in implementing systems that can not only assist with online payments and billing processes, but also medical coding and various administrative tasks, we highly recommend checking out Carepatron. A fully integrated, HIPAA-compliant platform, it will offer your business the perfect resources to enable it to become as efficient as possible.
So get Carepatron for free today to get the best practice management system. 👋
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